Interim Report to September BMW Group by mikeholy

VIEWS: 3 PAGES: 40

									Interim Report
to 30 September 2007




Q3




                       Rolls-Royce
                       Motor Cars Limited
02                             Interim Group Management Report
                               The BMW Group – an Overview




02   BMW Group – an Overview
07   Automobiles
                               BMW Group in figures                                                                                         3rd quarter          3rd quarter               Change
10   Motorcycles                                                                                                                                 2007                 2006                   in %
12   Financial Services
14   BMW Stock
15   Financial Analysis
20   Interim Group Financial   Vehicle production
     Statements
                                  Automobiles                                                                                units            371,569               329,143                   12.9
39   Financial Calendar
                                  Motorcycles 1]                                                                             units              20,299               22,279                   – 8.9


                               Deliveries to customers
                                  Automobiles                                                                                units            364,564              323,064                    12.8
                                  Motorcycles                                                                                units              23,549               23,230                     1.4


                               Workforce at end of quarter                                                                                   107,731               107,027                     0.7


                               Operating cash flow                                                                   euro million                1,678                   255               558.0


                               Revenues                                                                              euro million              13,778               11,557                   19.2
                               Profit before tax                                                                     euro million                  765                   720                   6.3
                                  Thereof:
                                  Automobiles                                                                        euro million                   704                   611                 15.2
                                  Motorcycles                                                                        euro million                      5                    4                 25.0
                                  Financial Services                                                                 euro million                   191                   182                   4.9
                                  Reconciliations                                                                    euro million                 – 135                   – 77              – 75.3
                               Income taxes                                                                          euro million                    38                – 268                      –
                               Net profit                                                                            euro million                  803                   452                 77.7
                               Earnings per share 2]                                                                          euro         1.22/1.22            0.69/0.69             76.8/76.8
                               1] including BMW G 650 X assembly at Piaggio S.p. A., Noale, Italy
                               2] for common/preferred stock in accordance with IAS 33. In computing earnings per share of preferred stock, earnings to cover the additional dividend of euro 0.02 per share
                                  of preferred stock are spread over the quarters of the corresponding financial year.




                               Deliveries of automobiles                                                                Revenues
                               in units                                                                                 in euro million



                               400,000                                                                                  14,000
                               350,000                                                                                  12,000
                               300,000                                                                                  10,000
                               250,000                                                                                    8,000
                               200,000                                                                                    6,000

                                                           Q1               Q2              Q3               Q4                                      Q1              Q2               Q3               Q4
                               2006                 332,923          365,547         323,064          352,436           2006                    11,618          13,193           11,557          12,631
                               2007                 333,276          397,009         364,564                            2007                    11,951          14,683           13,778
                                                                                                                                                                                  03




BMW Group in figures                                                                                           1 January to          1 January to                 Change
                                                                                                             30 September          30 September                     in %
                                                                                                                     2007                  2006


Vehicle production
   Automobiles                                                                                    units           1,160,247             1,028,949                     12.8
   Motorcycles 1]                                                                                 units              88,866                 83,350                     6.6


Deliveries to customers
   Automobiles                                                                                    units          1,094,849              1,021,534                      7.2
   Motorcycles                                                                                    units              82,779                 79,333                     4.3


Workforce at end of quarter                                                                                        107,731               107,027                       0.7


Operating cash flow                                                                       euro million                4,476                  3,998                   12.0


Revenues                                                                                  euro million              40,412                 36,368                    11.1
Profit before tax 2]                                                                      euro million                2,682                  3,248                 – 17.4
   Thereof:
   Automobiles                                                                            euro million                  2,114                2,319                   – 8.8
   Motorcycles                                                                            euro million                     95                     89                   6.7
   Financial Services                                                                     euro million                    563                   535                    5.2
   Reconciliations                                                                        euro million                   – 90                   305                       –
Income taxes                                                                              euro million                 – 539               – 1,061                   49.2
Net profit                                                                                euro million                 2,143                 2,187                   – 2.0
Earnings per share 3]                                                                              euro         3.27/3.28              3.33/3.34             –1.8/–1.8
1] including BMW G 650 X assembly at Piaggio S.p. A., Noale, Italy
2] Profit before tax for the first nine months of 2006 included a gain of euro 375 million arising from the partial settlement of the exchangeable bond on shares in Rolls-Royce plc,
   London.
3] for common/preferred stock in accordance with IAS 33. In computing earnings per share of preferred stock, earnings to cover the additional dividend of euro 0.02 per share
   of preferred stock are spread over the quarters of the corresponding financial year.




Profit before tax
in euro million



1,400
1,200
1,000
 800
 600

                             Q1                Q2               Q3               Q4
2006                     1,296             1,232              720               876
2007                        852            1,065              765
04                             Interim Group Management Report
                               The BMW Group – an Overview




02
07
     BMW Group – an Overview
     Automobiles
                               BMW Group confirms outlook                                BMW Group workforce up slightly
10   Motorcycles               The BMW Group’s performance continued as planned          The BMW Group had a worldwide workforce of
12   Financial Services
14   BMW Stock                 during the period under report. In total, 364,564 BMW,    107,731 employees at the end of the third quarter
15   Financial Analysis        MINI and Rolls-Royce brand cars were sold during          2007, a marginally higher number (+ 0.7%) than at
20   Interim Group Financial
     Statements                the third quarter 2007, 12.8 % more than in the same      30 September 2006. This includes additions in con-
39   Financial Calendar
                               quarter last year. The sales volume figure for the        nection with acquisitions made by the BMW Group
                               nine-month period was 1,094,849 units, represent-         in the financial services business.
                               ing a growth of 7.2 %. This was also a new sales vol-          1,214 apprentices started their careers with the
                               ume record for the first nine months of a year.           BMW Group in September 2007. The number of
                                    The Motorcycles business also progressed as          new apprenticeships therefore remained at a high
                               planned, despite some difficult business conditions.      level (2006: 1,207).
                               In total, 23,549 BMW motorcycles were sold during
                               the third quarter, 1.4 % more than in the previous        Strategic realignment of the BMW Group
                               year. For the period from January to September,           announced
                               the number of units sold rose by 4.3 % to a total of      The BMW Group announced its future strategic
                               82,779 motorcycles.                                       realignment at the end of September 2007. Through
                                    Financial services business continues to regis-      2020, the BMW Group intends to strengthen its
                               ter double-digit growth rates. The number of leasing      position within the global premium automobile mar-
                               and credit contracts in place with retail customers       ket by increasing retail sales volume to more than
                               and dealers at the quarter-end climbed to 2,539,701       two million units per annum. The strategic direction
                               units, 14.5 % more than one year earlier.                 is clearly defined: the BMW Group is the world’s
                                                                                         leading provider of premium products and premium
                               Double-digit growth for revenues                          services for individual mobility. This means that in
                               Group revenues rose sharply, reflecting the overall       addition to striving for organic growth in the core line
                               strong sales volume performance of the BMW                of business, the BMW Group will also engage in
                               Group. Revenues generated in the third quarter and        new and profitable areas of activity throughout the
                               for the nine-month period both increased at a dou-        automotive life-cycle and all the way along the value
                               ble-digit rate. Third-quarter group revenues rose by      added chain. At the same time, the BMW Group will
                               19.2 % to euro 13,778 million, whilst revenues for        invest substantially in future technologies, new ve-
                               the period from January to September climbed by           hicle concepts and state-of the-art drive systems.
                               11.1% to euro 40,412 million. Excluding exchange          The strategy will be aimed at maximising profitability
                               rate factors, group revenues for the nine-month           and increasing value over the long term. In order to
                               period would have risen by 14.0 %.                        achieve these objectives, two new areas of responsi-
                                    Reported results benefited to an increasing          bility have been created within the Board of Manage-
                               extent from the rise in group revenues. This is re-       ment for “Corporate and Brand Development” and
                               flected in the fact that the third quarter group profit   “Purchasing and Supplier Network”.
                               before tax improved by 6.3 % to euro 765 million.
                               Adverse external factors continued to affect pre-tax      BMW Welt opens
                               earnings for the period from January to September         BMW Welt was opened in Munich at the end of
                               2007. The continuing weakness of the US dollar            October, offering a wide range of experiences to
                               and the Japanese yen, combined with the higher            customers, visitors and local people alike. With this
                               cost of raw materials, continued to have an impact        building, which explores the limits of the technically
                               on group earnings. Costs also arose in conjunction        feasible, the BMW Group has set a new architectural
                               with market launches and production start-ups for         benchmark. The BMW Welt is the new home of the
                               numerous new models. At euro 2,682 million, the           BMW brand. It stands for dynamism and elegance,
                               profit before tax was therefore 17.4 % lower than in      perfectly reflecting the premium standards of the
                               the first nine months of the previous year. Excluding     BMW brand. The centrepiece of this multifunctional
                               the impact of the partial settlement of the exchange-     building is its individualised personal delivery centre.
                               able bond on shares in Rolls-Royce plc, London,           Each year, approximately 45,000 vehicles will be
                               the profit before tax for the nine-month period would     handed over to customers from all over the world.
                               have fallen by 9.4%.                                      The BMW Group expects 850,000 visitors per
                                                                                                               05




year. In addition to the exclusive presentation of all    of the Progressive Activity Sedan (PAS) which will
of its automobile model series and motorcycles,           add a range of intelligent solutions designed to en-
multi-media shows and exhibits will provide an in-        hance the functionality of new sedans.
sight into the research, development, design and               The MINI brand will also be broadening its
production activities of the BMW Group, giving            range with the introduction of a new model in the
visitors the chance to enjoy an all-round experience      Sports Activity Vehicles segment. Rolls-Royce will
of the BMW brand and of the company as a whole.           also enhance its range of models by launching a
BMW Welt also boasts an events forum including            coupé version as the third variant of the Phantom.
state-of-the-art technology for staging all kinds         A further Rolls-Royce model is also envisaged
of events, such as receptions, seminars, concerts,        which will be positioned in terms of price and
exhibitions, conferences and live transmissions.          size at a level somewhat below the Rolls-Royce
                                                          Phantom.
BMW Group’s model range expanded
The BMW Group continued to expand its range of            Purchasing office opened in Eastern Europe
models during the third quarter 2007 and also an-         The BMW Group opened an international purchas-
nounced numerous upcoming new model launches.             ing office in Budapest on 1 August 2007. This local
Following the market introduction of the revised          presence will ensure easier access to the Central
BMW 6 Series Coupé and Convertible models in              and Eastern European procurement markets for
September 2007, the BMW 1 Series Coupé and the            the first time. One of the prime objectives is there-
MINI Clubman will become available to customers           fore to identify and establish a network of qualified
from November 2007 onwards.                               suppliers for the BMW Group in Central and Eastern
      The BMW Group also announced plans to intro-        Europe.
duce a convertible version to the BMW 1 Series.
This BMW 1 Series Convertible will be a four-seater       Global economy relatively robust despite
and the first premium convertible to become avail-        uncertainties
able in the compact vehicle segment. The BMW M3           The global economy will continue to grow dynami-
will also be built with an additional body variant, the   cally in the fourth quarter 2007, although somewhat
BMW M3 Sedan. This vehicle will retain the typical        less strongly than in the previous year. This can be
BMW M3 appearance, whilst offering numerous               mainly put down to less expansive monetary and fiscal
personal customisation options, including a range of      policies and persisting rises in energy and raw mate-
ways to individualise the vehicle’s interior.             rial prices. It must also be expected that the credit
      The BMW Group is also working with great de-        crisis will continue to have an impact in the USA. The
termination to expand the range of models offered         resulting slow-down will be partially offset by stronger
by the Motorcycles segment. In this vein, the new         growth in the emerging economies. In full-year terms,
HP2 Sport was presented at the end of September           the emerging markets of Asia and Latin America are
at the motorcycle fair in Paris and will become avail-    likely to expand at rates similar to those registered in
able to customers in spring 2008. The HP2 Sport is        the previous year. The same applies to Europe and
the sportiest, most powerful, but also the lightest       Japan, albeit at a much lower level.
series Boxer to date and is designed primarily to               The sub-prime mortgage crisis in the USA
attract ambitious, sports-minded motorcyclists.           and its impact on the credit markets currently con-
      The BMW Group will continue its new-model           stitute the greatest risk to the global economy. If
initiative in the coming years. The successful X Se-      the crisis turns out to be more serious than gener-
ries will be further expanded to include the Sports       ally assumed to date, the adverse impact on growth
Activity Vehicle BMW X1. The BMW Concept X6 has           within the USA as well as the volume of goods
already been presented at the International Motor         exported to the USA will also be felt significantly into
Show (IAA) in Frankfurt. In addition, a four-door Gran    2008. At present, however, the crisis is not expected
Turismo will be built along the lines of the concept      to spread into other credit markets. Further sharp
study CS, previously presented in Shanghai. Plans         rises in energy and raw material prices also pose
are also underway to open up a completely new             a risk to the global economy, just as the strong euro
segment based on a fundamentally novel vehicle            does for countries that are part of the European
concept. This is currently being pursued in the form      Currency Union.
06




02
07
     BMW Group – an Overview
     Automobiles
                               International automobile markets continue to                      In the Motorcycles segment, the sales volume
10   Motorcycles               perform inconsistently                                      performance continues to reflect inconsistent mar-
12   Financial Services
14   BMW Stock                 Once again, the triad of traditional car markets (USA,      ket conditions. The BMW Group is responding to
15
20
     Financial Analysis
     Interim Group Financial
                               Japan and Western Europe) is unlikely to generate           this situation by engaging systematically in new
     Statements                any significant momentum in 2007. While the US              markets and making full use of potential efficiency
39   Financial Calendar
                               market continues to contract at a similar pace to the       benefits.
                               previous year, Japan and particularly Germany – the               The stable growth enjoyed by the Financial
                               latter as a consequence of the value added tax hike         Services segment represents a major contributing
                               and the uncertainty caused by the on-going CO2              factor towards the overall success of the BMW
                               debate – are experiencing high negative growth rates        Group. This positive trend continues unabated. The
                               this year. The remaining markets in Western Europe          integration of Dekra SüdLeasing Services GmbH
                               continue to perform inconsistently.                         (now operating as BMW Fuhrparkmanagement
                                     By contrast, the automobile markets in the            Beteiligungs GmbH) and its subsidiaries into the
                               emerging countries of Asia and Latin America are            BMW Group is progressing according to plan and
                               still maintaining their dynamic growth rates in 2007.       is a logical step towards achieving future growth.
                               The number of cars sold in China this year will in-         Higher refinancing costs will, however, remain a
                               crease by some 25 %; in the meantime, China has             challenge in the future.
                               become the second-largest automobile market in                    The exchangeable bond option on the BMW
                               the world after the USA. The markets in Brazil and          Group’s investment in Rolls-Royce plc, London, was
                               Argentina are growing at similarly high rates and also      largely settled in 2006 and there will be no compara-
                               India is again recording double-digit growth. Over-         ble impact on earnings in 2007.
                               all, the premium segments of the automobile mar-                  Stable growth in the operating segments as well
                               kets will continue to grow faster than non-premium          as continuous efficiency and productivity improve-
                               segments.                                                   ments will provide further momentum for group
                                                                                           earnings during the remainder of the year. Adverse
                               Risk management                                             exchange rate factors, higher raw material costs and
                               As a globally operating enterprise, the BMW Group           less favourable refinancing conditions as a result of
                               is confronted with numerous risks. A description of         higher interest rates still remain the main challenges
                               these risks is provided in the group management re-         to be overcome as far as future earnings are con-
                               port for the financial year ended 31 December 2006          cerned. In particular, the continuing weakness of the
                               (Annual Report, page 58 et seq.).                           US dollar and the Japanese yen continue to have a
                                                                                           negative impact on earnings. Despite these negative
                               BMW Group reaffirms targets for 2007                        factors, the BMW Group maintains its business fore-
                               The BMW Group forecasts a continuation of its               casts for the year and expects each of the segments
                               successful performance over the remainder of the            to perform well for the year as a whole. Excluding
                               financial year 2007.                                        the exceptional gain on the Rolls-Royce exchange-
                                     Car unit sales for the period from January to Sep-    able bond, the BMW Group aims to achieve higher
                               tember 2007 developed as planned. After moderate            pre-tax group earnings in 2007 than in the previous
                               growth at the beginning of 2007, sales volume fig-          year.
                               ures have gathered pace as the year has progressed.               The BMW Group is confident of remaining on
                               Against this background, the BMW Group reaffirms            growth course in the coming years and of continuing
                               its forecast and expects the number of cars sold            to generate above-average returns for the sector.
                               during the full year to increase in the high single-digit
                               percentage range. As before, new high levels are
                               predicted for all three brands.
                                     Exchange rate factors and higher raw material
                               costs will have an adverse impact on full-year earn-
                               ings, in particular those of the Automobiles segment.
                               Due to the faster sales volume growth rates, the
                               BMW Group nevertheless forecasts higher pre-tax
                               earnings for the Automobiles segment than in the
                               previous year.
Interim Group Management Report                                                                                                          07

Automobiles




Increase in the number of BMW Group cars sold              rose fourfold to 823 units (+ 309.5 %) compared to
A total of 364,564 BMW, MINI and Rolls-Royce               the previous year.
brand cars was handed over to customers in the                  The BMW Group sold a total of 90,888 BMW,
third quarter 2007, 12.8 % more than in the same           MINI and Rolls-Royce brand cars in North America
quarter last year. This set a new sales volume record      during the third quarter 2007, surpassing the pre-
of 1,094,849 vehicles (+ 7.2 %) for the nine-month         vious year’s equivalent figure by 15.5 %. A total of
period.                                                    269,491 cars were handed over to customers in the
     The sales volume performance of the BMW               nine-month period from January to September,
brand benefited in particular from favourable model        8.8 % more than in the previous year. The third-
life-cycle factors affecting the BMW 3 Series and          quarter sales volume in the USA, the BMW Group’s
the BMW X5. In total, 306,964 BMW brand vehicles           largest single market, rose by 15.7% to 84,048
were sold during the third quarter 2007, 10.8 % more       units. The nine-month figure of 248,489 units repre-
than in the previous year. The nine-month sales vol-       sented an increase of 8.0 %. The BMW Group set
ume figure rose by 6.3 % to a total of 929,379 units.      a particularly impressive record in the USA with
     The third-quarter sales volume of MINI brand          the BMW 3 Series Sedan: this model is now the
vehicles rose sharply, climbing by 25.2 % to 57,315        most successful German-built imported car on the
units. For the period from January to September,           US automobile market.
the number of MINI brand vehicles sold went up by               The BMW Group’s third-quarter sales volume in
12.3 % to a total of 164,891 units, thus achieving a       Europe* rose by 14.1% to 215,579 units. By the end
new high level for a nine-month period. Capacity           of September, 651,550 units had been handed over
expansion measures at the various MINI plants had          to customers, 6.8 % more than in the previous year.
resulted in restricted availability of MINI brand mod-     In Germany*, the BMW Group’s largest single mar-
els during the first nine months of 2006.                  ket in Europe, the third-quarter sales volume rose to
     The availability of the Rolls-Royce Phantom           64,964 units, an increase of 2.8 %. The nine-month
Drophead Coupé led to a sharp rise in the number           sales volume of 202,211 units was 4.3 % below the
of Rolls-Royce cars handed over to customers during        previous year’s equivalent figure. The number of
the period under report. The third-quarter sales           cars sold in the third quarter in the United Kingdom,
volume figure increased by 51.6 % to 285 units. In         the BMW Group’s second largest market in Europe,
total, 579 Rolls-Royce were handed over to cus-            went up by 5.7% to 47,310 units. The nine-month
tomers during the first nine months of 2007, 21.9 %        figure of 129,938 units represented an increase of
more than in the corresponding period one year             9.3 %. Sales volumes also developed positively in
earlier.                                                   other European countries during the first nine months
                                                           of 2007. The increase in France was particularly pro-
Sales volume increases on nearly all markets               nounced, with the sales volume rising by 22.9 % to
Car sales volumes of the BMW Group were well               46,437 units. The number of cars sold in Italy during
above the previous year’s levels in virtually all mar-     this period went up by 7.4 % to 78,506 units, whilst
kets, both on a quarterly and a nine-month basis.          the sales volume in Spain increased by 8.9 % to
High growth rates were achieved on the Eastern             51,609 units.
European, Asian and Latin American markets. In                  The BMW Group’s sales volume in Asia in the
India, where the BMW Group has been operating              third quarter 2007 increased by 7.2 % to 38,090
its own plant since March, the number of cars sold         units. Sales volume for the nine-month period
in the period from January to September 2007               * Previous   year’s figures restated in line with new allocation.




Automobiles                                                                       3rd quarter            3rd quarter           Change
                                                                                       2007                   2006               in %



Production                                                      units               371,569                 329,143              12.9
Deliveries to customers                                         units               364,564                323,064               12.8
Revenues                                                 euro million                 13,107                 11,088              18.2
Profit before tax                                        euro million                     704                     611            15.2
Workforce at end of quarter                                                           98,929                 99,055              – 0.1
08




02
07
     BMW Group – an Overview
     Automobiles
                               increased by 10.6 % reaching 114,815 units. In total,       the first nine months of the year to 165,109 units
10   Motorcycles               46,080 cars were handed over to customers in                (– 2.6 %). This figure includes 130,292 units of the
12   Financial Services
14   BMW Stock                 Japan during the period from January to September           BMW 5 Series Sedan (– 1.8 %) and 34,817 of the
15
20
     Financial Analysis
     Interim Group Financial
                               2007, similar to the level one year earlier. The sales      BMW 5 Series Touring model (– 5.7%).
     Statements                volume increase on the Chinese markets (China,                   Due to model life-cycle factors, the sales volume
39   Financial Calendar
                               Hong Kong and Taiwan) was particularly marked. In           of the BMW 6 Series was down on the previous
                               total, 43,285 units were sold there during the nine-        year’s figure, since the model update did not become
                               month period, 31.8 % more than in the previous year.        available to customers until the end of September
                                                                                           2007. In total,14,325 units of the BMW 6 Series were
                               BMW 3 Series and BMW X5 particularly                        sold during the first nine months of 2007, 12.4 %
                               successful                                                  fewer than in the corresponding period last year.
                               New sales volume highs were registered for the BMW          The nine-month sales volume figure comprised
                               brand, both for the third quarter (306,964 units,           6,859 units of the BMW 6 Series Coupé (– 23.7%)
                               +10.8 %) and for the nine-month period (929,379             and 7,466 units of the BMW 6 Series Convertible
                               units, + 6.3 %).                                            (+1.5 %).
                                     With the revised models of the BMW 1 Series                In its sixth year since market introduction, the
                               and the new three-door version now fully available on       sales volume of the BMW 7 Series developed as
                               the markets, the third-quarter sales volume increased       expected in line with the normal model life-cycle. In
                               sharply. A growth rate of 16.9 % was recorded with          total, 31,286 units of the BMW 7 Series were handed
                               44,048 units sold. A total of 114,330 units of the          to customers during the period from January to
                               BMW 1 Series had been sold by the end of Septem-            September (–14.9 %).
                               ber, still 2.0 % down on the sales volume recorded               The sales volume of the Sports Activity Vehicle
                               in the corresponding nine-month period last year.           BMW X3 remained at a high level. The nine-month
                                     The BMW 3 Series remained the strongest sell-         sales volume figure of 83,001 units was 4.4 % up on
                               ing model. Overall, the BMW Group handed over               the previous year.
                               418,247 units to customers during the nine-month                 With the new BMW X5 now available on all
                               period, 11.5 % more than in the previous year. The          markets worldwide, sales figures have developed
                               sales volume of the BMW 3 Series Sedan up to the            extremely well. The nine-month sales volume of
                               end of September 2007 fell by 7.2 % to 238,665              80,540 units represented a growth of 40.2 % for the
                               units and that of the BMW 3 Series Touring by 3.9 %         BMW X5.
                               to 75,281 units. By contrast, the number of BMW                  Sales of the BMW Z4 for the nine-month period
                               3 Series Coupés and Convertibles sold rose sharply.         were lower than in the previous year. The number
                               A total of 65,326 customers elected to buy the              of cars sold fell by 1.2 % to 22,541 units.
                               BMW 3 Series Coupé, 242.4 % more than in the
                               corresponding nine-month period last year. The              MINI brand sales volume well up
                               sales volume of the BMW 3 Series Convertible, first         Whereas capacity expansion measures at the British
                               introduced in spring 2007, almost doubled in the            MINI plants and the model change restricted avail-
                               first nine months of 2007 to 38,912 units (+ 92.8 %).       ability of the MINI in 2006, a new sales volume record
                                     Following the introduction of the revised BMW         has been registered for the first nine months of
                               5 Series in spring 2007, the third-quarter sales volume     2007. In total, 164,891 units were sold during the
                               for this model rose by 4.5 % to 53,307 units. This          period from January to September, 12.3 % more
                               brought the total of BMW 5 Series cars sold during          than in the previous year. The third-quarter sales


                               Automobiles                                                                1 January to     1 January to   Change
                                                                                                        30 September     30 September       in %
                                                                                                                2007             2006



                               Production                                                      units       1,160,247        1,028,949       12.8
                               Deliveries to customers                                         units       1,094,849        1,021,534        7.2
                               Revenues                                                  euro million         38,782           35,262       10.0
                               Profit before tax                                         euro million           2,114           2,319       – 8.8
                                                                                                              09




volume figure jumped by as much as 25.2 % to              period was up by 18.3 % to 692 units, including
57,315 units.                                             130 units of the Phantom Drophead Coupé.
     The MINI brand (including the Convertible)
continues to generate a very high-value model mix.        Third-quarter revenues and earnings of the
During the nine-month period from January to              Automobiles segment increased
September, the MINI One, MINI Cooper and MINI             The level of revenues generated by the Automobiles
Cooper S accounted for 14.0 %, 55.6 % and 30.4 %          segment reflected the good sales volume perform-
respectively in sales volume terms.                       ance. Third-quarter segment revenues grew slightly
     The MINI Clubman will be available to cus-           faster than sales volume, rising by 18.2 % to euro
tomers from November 2007 onwards, thus adding            13,107 million. Segment revenues for the nine-month
a new model to the MINI product range and offering        period rose by 10.0 % to euro 38,782 million.
additional functionality as well as numerous per-              The profit before tax of the Automobiles seg-
sonalised features. The new model is fitted with two      ment for the third quarter 2007 improved by 15.2 %
doors which open outwards at the rear and an addi-        to euro 704 million. External factors continued to
tional reverse-opening “clubdoor” on the right side       have a significant adverse effect on pre-tax earnings.
of the vehicle.                                           The continuing weakness of the US dollar and the
                                                          Japanese yen, combined with the higher cost of raw
First Phantom Drophead Coupés handed over                 materials, had a greater impact than expected on
to customers                                              earnings for the first nine months of 2007. Costs
A total of 285 Rolls-Royce brand vehicles were sold       were also incurred in conjunction with market
during the third quarter 2007, 51.6 % more than one       launches and production start-ups for new models.
year earlier. The Phantom Drophead Coupé, with            At euro 2,114 million, the nine-month segment profit
83 units sold, made a strong contribution to this sharp   before tax was therefore 8.8 % lower than in the pre-
third-quarter increase. The number of Rolls-Royce         vious year.
cars handed over to customers during the nine-month
period rose by 21.9 % to 579 units.                       Workforce of Automobiles segment almost
                                                          unchanged
Car production volume well above previous                 The Automobiles segment had a worldwide work-
year’s level                                              force of 98,929 employees at 30 September 2007,
The number of BMW, MINI and Rolls-Royce brand             practically unchanged from one year earlier (– 0.1%).
cars manufactured during the third quarter 2007 in-
creased by 12.9 % to 371,569 units. The nine-month
production volume of 1,160,247 units represented
an increase of 12.8 %.
     The third-quarter production volume of BMW
brand cars, at 308,514 units, was up by 8.6 %.
During the period from January to September 2007,
983,176 BMW vehicles left the various production
sites, 10.6 % more than in the previous year. The
BMW site in Leipzig is to be expanded by the end of
2009, with the construction of a new pressings plant
and component production facilities for door, bonnet
and boot panels.
     The number of MINI vehicles manufactured
during the third quarter jumped by 40.0 % to a total
of 62,786 units. During the first nine months of the
year, 176,379 MINI vehicles were manufactured,
26.8 % more than one year earlier.
     269 Rolls-Royce vehicles were manufactured
during the third quarter 2007 at the British plant in
Goodwood (+ 38.7%). The number of Rolls-Royce
vehicles manufactured during the nine-month
10                             Interim Group Management Report
                               Motorcycles




02
07
     BMW Group – an Overview
     Automobiles
                               Inconsistent market development                                         in the period from January to September 2007 de-
10   Motorcycles               The international motorcycle markets performed                          clined by 9.0 %. Sales volume figures continued
12   Financial Services
14   BMW Stock                 inconsistently both on a third-quarter and a nine-                      their upward trend in Spain (8,129 units/+ 9.2 %) and
15
20
     Financial Analysis
     Interim Group Financial
                               month basis. The 500 cc plus motorcycles seg-                           in Italy (12,702 units/+ 4.1%).
     Statements                ment relevant for the BMW Group did not match the                             The contraction of the US motorcycles market
39   Financial Calendar
                               high level recorded in the previous year. Although                      was reflected in the sales volume performance of
                               there was a recovery in the third quarter (+1.0 %),                     the Motorcycles segment. In total, 9,440 BMW mo-
                               the sales volume for the first nine months of 2007                      torcycles were sold during the first nine months of
                               was still slightly down (– 0.9 %). The world’s largest                  2007, 5.9 % fewer than in the corresponding period
                               motorcycle market, the USA, contracted by 3.9 %                         last year. The Motorcycles segment registered a
                               during the nine-month period up to September                            sharp rise (+ 27.6 %) in Japan with a sales volume of
                               2007. The motorcycle markets in Europe increased                        2,579 units. This was largely attributable to the suc-
                               marginally over the first nine months of 2007                           cess of the BMW F 800 models.
                               (+1.4 %), whereby the development of the individual
                               markets was not consistent. In Germany, the market                      R 1200 GS remains the best-selling model
                               contracted by 2.7% and in Italy by as much as 6.7%.                     The large long-distance enduro R 1200 GS re-
                               By contrast, the markets in Spain and the United                        mained the best-selling BMW motorcycle in the first
                               Kingdom grew by 16.0 % and 6.6 % respectively.                          nine months of 2007. Including the Adventure
                               The Japanese 500 cc plus motorcycles market con-                        model variant, it leads the BMW sales rankings with
                               tracted by 1.8 % compared to the same period in                         25,181 units sold. Since its market launch in March
                               2006.                                                                   2004, more than 100,000 units of this model have
                                                                                                       been handed over to customers. Second on the
                               Motorcycles segment increases sales                                     sales volume list, with 9,485 units sold, came the
                               volume                                                                  long-distance tourer R1200 RT, followed by the
                               In both the third quarter and nine-month period, the                    F 650 GS enduro, which, including the Dakar model
                               BMW Group’s Motorcycles segment was generally                           variant, achieved a sales volume of 8,638 units.
                               able to avoid the negative trends prevailing on the
                               motorcycle markets. In total, 23,549 BMW motor-                         Acquisition of Husqvarna completed
                               cycles were sold during the third quarter 2007, 1.4 %                   The BMW Group completed the acquisition of the
                               more than in the previous year. The sales volume                        motorcycle manufacturer Husqvarna on 1 October,
                               figure for the period from January to September was                     thereby purposefully expanding the Motorcycles
                               82,779 units, 4.3 % ahead of the corresponding                          segment's activities in the one-cylinder class.
                               period in 2006.                                                              The Husqvarna models are mainly intended for
                                    The number of motorcycles sold in Europe was                       the competitive sports market. With this move, the
                               marginally down on the previous year. The nine-                         BMW Group is rapidly expanding its product range
                               month sales volume of 59,491 units represented a                        with a view to increasing its appeal to younger buyers
                               drop of 0.6 %. The downturn was particularly sharp                      and to cover the off-road and supermoto segments.
                               in Germany, where sales of 16,869 BMW motorcycles                       The acquisition will also give the Motorcycles seg-


                               Motorcycles                                                                          3rd quarter   3rd quarter    Change
                                                                                                                         2007          2006        in %



                               Production*                                                                 units       20,299        22,279        – 8.9
                               Deliveries to customers                                                     units       23,549        23,230         1.4
                               Revenues                                                              euro million         259           278        – 6.8
                               Profit before tax                                                     euro million            5             4       25.0
                               Workforce at end of quarter                                                              2,785         2,819        – 1.2
                               * including   BMW G 650 X assembly at Piaggio S.p. A., Noale, Italy
                                                                                                                                11




ment direct access to a worldwide sales network in
the off-road segment.

100,000th R 1200 GS manufactured at the
Berlin plant
In total, 20,299 BMW motorcycles were manufac-
tured during the third quarter 2007, 8.9 % fewer than
in the same quarter last year. This figure included
19,031 units manufactured at the BMW Berlin plant
and 1,271 units manufactured by the cooperation
partner, Piaggio S. p. A. in Noale, Italy. At the end of
July, the 100,000th R 1200 GS came off the BMW
Berlin plant production line. This is a record produc-
tion figure for a single model (including the Adventure
model variant) and has been achieved in less than
four years.
     In total, 88,866 BMW motorcycles (80,789 in
Berlin and 8,077 in Noale) were manufactured during
the first nine months of 2007 (+ 6.6 %).

Motorcycle segment earnings up on
previous year
Third-quarter Motorcycle segment revenues totalled
euro 259 million and were thus 6.8% below the
figure achieved in the previous year. Revenues for
the nine-month period edged up by 1.2 % to euro
1,022 million.
      Segment profit before tax for the third quarter
amounted to euro 5 million (+25.0%). The profit be-
fore tax for the nine-month period was euro 95 mil-
lion, 6.7% ahead of the figure reported for the corre-
sponding period in 2006.

Workforce of Motorcycles segment down
slightly
The BMW Group had a workforce of 2,785 employees
in the Motorcycles segment at 30 September 2007,
slightly lower (–1.2 %) than one year earlier.


Motorcycles                                                                            1 January to     1 January to   Change
                                                                                     30 September     30 September       in %
                                                                                             2007             2006



Production*                                                                 units          88,866           83,350        6.6
Deliveries to customers                                                     units          82,779           79,333        4.3
Revenues                                                              euro million          1,022            1,010        1.2
Profit before tax                                                     euro million              95               89       6.7
* including   BMW G 650 X assembly at Piaggio S.p. A., Noale, Italy
12                             Interim Group Management Report
                               Financial Services




02
07
     BMW Group – an Overview
     Automobiles
                               Financial Services segment remains on growth                     The total volume of all new credit and leasing
10   Motorcycles               course                                                     contracts signed with retail customers during the first
12   Financial Services
14   BMW Stock                 The Financial Services segment continued to gen-           nine months of 2007 amounted to euro 21,009 mil-
15
20
     Financial Analysis
     Interim Group Financial
                               erate profitable growth in both the third quarter and      lion, 15.3 % more than in the previous year.
     Statements                the nine-month period despite challenging business               This strong performance in the area of new re-
39   Financial Calendar
                               conditions in the form of rising refinancing costs in      tail customer business is also reflected in the size of
                               the major regions and fierce competitive pressure on       the overall contract portfolio. The number of retail
                               the markets. The segment’s business volume in bal-         customer contracts in place at 30 September 2007
                               ance sheet terms at 30 September 2007 amounted             was 2,343,515 contracts, 14.9 % more than one year
                               to euro 49,491 million, an increase of 16.5 % over         earlier. Sharp growth was recorded in all regions.
                               the same date last year. At the end of the third quar-     The number of retail customer contracts in Germany
                               ter, a total of 2,539,701 lease and credit contracts       increased by 16.6 %, whilst the remaining European
                               were in place with dealers and retail customers,14.5 %     markets and the Asia/Oceania/Africa region grew
                               more than one year earlier. The proportion of new          by 12.8 % and 14.3 % respectively. The largest por-
                               BMW Group cars leased or financed by the Finan-            tion of the contract portfolio again related to the
                               cial Services segment at 30 September 2007                 Americas region; the number of contracts in place
                               was 44.7%, surpassing the previous year’s level by         there increased by 15.6 % to 771,487 units.
                               2.5 percentage points.
                                                                                          Dealer financing remains on growth course
                               Retail customer business growing dynamically               The Financial Services segment supports the BMW
                               In total, 272,938 new credit and leasing contracts         Group dealer organisation with a comprehensive
                               were signed with retail customers during the third         range of products. In addition to the financing of
                               quarter 2007, 24.6 % more than in the same quarter         vehicle inventories at the dealerships, these activi-
                               last year. Retail customer business also performed         ties also include real estate and equipment financing.
                               well on a nine-month basis. With 801,791 new               The total volume of dealer financing contracts
                               contracts signed worldwide, the previous year’s            managed by the Financial Services segment at the
                               equivalent figure was surpassed by 16.9 %. Leasing         reporting date stood at euro 7,464 million, 16.0 %
                               business contributed to this growth with a 19.6 %          higher than one year earlier.
                               increase in the number of contracts signed. Credit
                               financing grew by 15.4 % for the nine-month period.        Fleet business continues to grow
                               Lease contracts and credit financing accounted for         The contract portfolio for fleet business again grew
                               37.8 % and 62.2 % of new business respectively.            strongly in the third quarter 2007, increasing in num-
                                    In the area of used car financing, the number of      ber by 56.4 % compared to one year earlier. At the
                               new contracts increased by 11.3 %. The number of           reporting date, Alphabet entities managed a portfolio
                               used BMW and MINI brand cars financed during the           of 263,244 contracts. The volume increase com-
                               nine-month period was almost the same as in the            pared to one year earlier, excluding the contracts
                               previous year.                                             taken over in conjunction with the acquisition of


                               Financial Services                                                      3rd quarter   3rd quarter    Change
                                                                                                            2007          2006        in %



                               New contracts with retail customers                                      272,938       219,070          24.6
                               Revenues                                                 euro million       3,569         2,703         32.0
                               Profit before tax                                        euro million         191           182          4.9
                               Workforce at end of quarter                                                  4,123        3,400         21.3
                                                                                                                                                13




Dekra SüdLeasing Services GmbH (now operating                                           ployees who joined the group in conjunction with
as BMW Fuhrparkmanagement Beteiligungs GmbH),                                           acquisitions made by the BMW Group in both
was 20.9 %. In July, Alphabet also commenced                                            Germany and Malaysia during the second quarter
operations in Denmark and is therefore now repre-                                       2007.
sented across the whole of Scandinavia.

Strong competition continues to affect
banking business
The Financial Services segment’s deposit volume
amounted to euro 5,776 million at 30 September
2007 and was thus 1.9 % lower than one year earlier.
By contrast, the number of securities custodian
accounts increased to 32,075 during the period un-
der report, 9.4 % more than at the end of the same
period last year.

Insurance business registering continuous
growth
Demand remains brisk for insurance products, which
are offered to customers in addition to finance and
lease contracts. The insurance contract portfolio
increased to 908,496 contracts at the end of the
period under report.

Financial Services segment earnings above
previous year’s level
In line with the positive development of business,
the Financial Services segment’s profit before tax
was higher than in the previous year. At euro 563
million, the segment’s nine-month profit before tax
surpassed the previous year by 5.2 %.

Further rise in workforce of Financial Services
segment
The Financial Services segment had a workforce of
4,123 employees at 30 September 2007, 21.3 %
more than one year earlier. This figure includes em-


Financial Services                                                                                     1 January to     1 January to   Change
                                                                                                     30 September     30 September       in %
                                                                                                             2007             2006



New contracts with retail customers                                                                       801,791          685,844       16.9
Business volume*                                                                      euro million         49,491           42,488       16.5
Revenues                                                                              euro million         10,101            8,310       21.6
Profit before tax                                                                     euro million            563              535        5.2
* leased   products plus receivables from sales financing (per Group balance sheet)
14                             Interim Group Management Report
                               BMW Stock




02
07
     BMW Group – an Overview
     Automobiles
                               BMW stock in the third quarter 2007                               the end of the second quarter corresponded more
10   Motorcycles               The third quarter was marked by a general sense of                or less to the performance of the market as a whole.
12   Financial Services
14   BMW Stock                 nervousness on the markets. The crisis on the US                  The price of BMW preferred stock was euro 2.60
15
20
     Financial Analysis
     Interim Group Financial
                               credit markets and the continued downward trend                   down during the third quarter, falling by 6.4 % on low
     Statements                of property prices in the USA unsettled financial                 trading volumes.
39   Financial Calendar
                               markets around the world. Against this background,
                               stock markets were unable to continue the good                    BMW Group again sector leader in the Dow
                               performance seen since the beginning of the year.                 Jones Sustainability World Index
                               After registering some sharp increases during the                 For the third time in succession, the BMW Group
                               first two quarters of 2007, the leading German stock              was the sector leader in the Dow Jones Sustainability
                               index, the DAX, lost ground towards the end of the                World Index and therefore holds the title as the
                               period under report. The index closed at 7,861.51                 world’s most sustainable automobile manufacturer.
                               points at the end of the quarter, representing a drop             In order to be included in the index, general sustain-
                               of 1.4 % against its opening level at the beginning of            ability criteria and sector-specific challenges such
                               the third quarter 2007.                                           as climate change are taken into account.
                                     The US dollar remained on the weak side during                    The Dow Jones Sustainability Index was created
                               the third quarter, moving at rates in the range of                in 1999 as the first global sustainability index and
                               US dollar 1.34 –1.43 to one euro. Compared to the                 has since then been published annually by the SAM
                               closing exchange rate at the end of the previous                  Group, based in Zurich, in cooperation with Dow
                               quarter, the US currency lost 4.7% in value.                      Jones Indexes and STOXX Limited. The BMW Group
                                     Export-orientated automobile stocks performed               is the only enterprise from the automobile sector
                               well during the quarter under report despite the                  which has been represented continuously in these
                               uncertainties prevailing on the financial markets.                important sustainable business indices since their
                               The Prime Automobile Performance Index was able                   creation.
                               to steer clear of the volatility of the market as a                     The BMW Group keeps the public informed of
                               whole and to outperform the general index. It closed              its commitment and the progress made in the field
                               on 28 September 2007 at 825.06 points, 6.3 %                      of sustainable business in its Sustainable Value
                               higher than its closing level at the end of the second            Report, which is published once every two years. The
                               quarter 2007.                                                     current Sustainable Value Report 2007/2008 was
                                     In comparison with previous quarters, BMW                   presented to the public in mid-September to coincide
                               common stock performed almost exactly in line with                with the IAA. The report can be downloaded from
                               BMW preferred stock. BMW common stock closed                      the internet at www.bmwgroup.com/sustainability.
                               at euro 45.23 at the end of the quarter under report.             A printed version can also be ordered at that
                               This drop of euro 2.78 or 5.8 % against its price at              address.


                               Development of BMW stock compared to stock exchange indices
                               (Index: 29. 6. 2007 = 100)



                               116
                               112
                               108
                               104
                               100
                                96
                                92
                                88
                                84

                                                                               July                            August                      September
                                     BMW preferred stock    BMW common stock          Prime Automobile      DAX
Interim Group Management Report                                                                                      15

Analysis of the Interim Group Financial Statements




Earnings performance for the third quarter 2007            and development costs represented 5.2 % of rev-
Third-quarter group revenues increased by 19.2 %           enues, unchanged compared to the previous year.
to euro 13,778 million. External revenues of the           They include amortisation of capitalised development
Automobiles segment and of the Financial Services          costs amounting to euro 283 million (third quarter
segment were respectively 17.3 % and 29.3 % higher         2006: euro 238 million). Total research and develop-
than in the same quarter last year. External revenues      ment costs for the third quarter 2007 amounted to
of the Motorcycles segment fell by 6.5 % compared          euro 736 million (third quarter 2006: euro 737 mil-
to the third quarter 2006. Revenues from other ac-         lion). This figure comprises research costs, develop-
tivities of the Group amounted to euro 47 million          ment costs not recognised as assets and capitalised
and related mainly to the softlab Group. The com-          development costs. This results in a third quarter
parable figure for the same quarter last year was euro     research and development expenditure ratio of
46 million.                                                5.3 % (third quarter 2006: 6.4 %). Depreciation and
      Cost of sales increased by 22.2 % to euro            amortisation included in cost of sales, sales and
10,902 million, rising therefore at a faster rate than     administrative costs and research and development
revenues. This was due to the negative impact of ex-       costs amounted to euro 924 million (third quarter
ternal factors caused by exchange rate fluctuations        2006: euro 847 million).
and high raw material prices. The third-quarter gross            The positive net amount from other operating
profit in absolute terms increased by 9.0 % to euro        income and expenses increased by euro 23 million
2,876 million and the gross profit percentage was          compared to the third quarter last year, mainly as a
20.9 % (third quarter 2006: 22.8 %). The gross profit      result of the higher level of income from the reversal
margin of Industrial operations fell marginally by         of provisions.
0.8 percentage points to 19.2 % and that of Financial            The financial result for the third quarter 2007
operations fell by 1.7 percentage points to 10.1%.         deteriorated by euro 46 million compared to the same
      The increase in sales and administrative costs       quarter last year, reflecting unfavourable changes in
attributable to model life-cycle and market engage-        net interest expense (euro 19 million), the result from
ment costs is, as expected, tailing off by comparison      investments (euro 22 million), the result from equity
with previous quarters. The third-quarter increase         accounted investments (euro 3 million) and sundry
was 4.3 %. Sales and administrative costs repre-           other financial result (euro 2 million).
sented 8.9 % (third quarter 2006: 10.2 %) of revenues.           Despite the adverse factors described above,
      Research and development costs increased             the third-quarter profit before tax was up 6.3 %
sharply compared to the previous year.This is mainly       against the previous year. The pre-tax return on
due to the increased expenditure on measures               sales was 5.6 % (third quarter 2006: 6.2 %).
aimed at reducing CO2 emissions and to the higher                The income tax expense decreased sharply, and
level of depreciation expense.Third-quarter research       in line with expectations, as a result of the first-time


Revenues by segment                    Revenues                   Revenues with                     Total
in the 3rd quarter                  with third parties            other segments                  revenues
in euro million                   2007              2006       2007           2006        2007               2006



Automobiles                      10,331          8,805        2,776         2,283        13,107          11,088
Motorcycles                        259             277            –             1          259                278
Financial Services                3,141          2,429          428           274         3,569              2,703
Reconciliations                     47               46      – 3,204       – 2,558      – 3,157          – 2,512
Group                           13,778         11,557             –             –       13,778          11,557
16




02
07
     BMW Group – an Overview
     Automobiles
                               inclusion of the impact of the German Business Tax                   Research and development costs were 21.1%
10   Motorcycles               Reform Act 2008. The BMW Group recorded a net                   higher than in the first nine months of 2006, and
12   Financial Services
14   BMW Stock                 profit of euro 803 million for the third quarter 2007,          represent 5.4 % (first nine months 2006: 5.0 %) of
15
20
     Financial Analysis
     Interim Group Financial
                               euro 351 million or 77.7% higher than the result                revenues. This is mainly due to the increased expen-
     Statements                posted for the same quarter last year. For the third            diture on measures aimed at reducing CO2 emissions
39   Financial Calendar
                               quarter 2007, the BMW Group generated earnings                  and to the higher level of depreciation expense.These
                               per share of common stock and preferred stock of                figures include amortisation of capitalised develop-
                               euro 1.22 (third quarter 2006: euro 0.69).                      ment costs amounting to euro 800 million (first nine
                                                                                               months 2006: euro 608 million). Total research and
                               Earnings performance for the first nine months                  development costs for the first nine months of 2007
                               of 2007                                                         amounted to euro 2,299 million (first nine months
                               Nine-month group revenues rose by 11.1% to euro                 2006: euro 2,174 million). This figure comprises
                               40,412 million. Excluding the effect of currency                research costs, development costs not recognised
                               fluctuations, the increase was 14.0 %. Within group             as assets and capitalised development costs. The
                               revenues, external revenues of the Automobiles and              research and development expenditure ratio for
                               Financial Services segments were 9.1% and 20.1%                 the first nine months of 2007 was 5.7% (first nine
                               above those of the corresponding period in 2006.                months 2006: 6.0 %). Depreciation and amortisation
                               External revenues of the Motorcycles segment for the            included in cost of sales, sales and administrative
                               nine-month period increased slightly (+ 1.7%). Rev-             costs and research and development costs amounted
                               enues from other activities of the Group amounted               to euro 2,679 million (first nine months 2006: euro
                               to euro 146 million and related mainly to the softlab           2,354 million).
                               Group. The comparable figure for the corresponding                   The positive net amount from other operating
                               nine-month period last year was euro 140 million.               income and expenses also decreased compared to
                                     Cost of sales amounted to euro 31,468 million,            one year earlier on a nine-month basis, mainly due
                               with the increase of 12.1% only marginally higher than          to the lower level of gains on foreign currency trans-
                               the increase in revenues.The nine-month gross profit            actions and the impact of first-time consolidations.
                               figure was therefore 7.7% ahead of the previous                      The financial result was a net expense of euro
                               year. The gross profit percentage was 22.1% (first              222 million, which represented a deterioration of
                               nine months 2006: 22.8 %). The gross profit margin              euro 439 million compared to the corresponding
                               of Industrial operations was 20.0 % (first nine months          period last year. As previously mentioned, earnings
                               2006: 20.3 %). The gross profit percentage of Finan-            for the first nine months of 2006 included a gain of
                               cial operations fell by 0.5 percentage points to 10.6 %.        euro 375 million resulting from the partial settlement
                                     Sales and administrative costs increased by               of the exchangeable bond option relating to the BMW
                               9.0 % compared to the corresponding period last                 Group investment in Rolls-Royce plc, London. Fur-
                               year and represent 9.8 % (first nine months 2006:               ther exchangeable bond options were settled during
                               10.0 %) of revenues.                                            the first nine months of 2007, giving rise to a gain


                               Revenues by segment for the period          Revenues                   Revenues with                    Total
                               from1January to 30 September             with third parties            other segments                 revenues
                               in euro million                        2007              2006       2007           2006       2007               2006



                               Automobiles                          30,439          27,894        8,343         7,368      38,782           35,262
                               Motorcycles                           1,017            1,000           5            10        1,022              1,010
                               Financial Services                    8,810            7,334       1,291           976       10,101              8,310
                               Reconciliations                        146              140       – 9,639       – 8,354     – 9,493          – 8,214
                               Group                                40,412         36,368             –             –      40,412          36,368
                                                                                                                                                                                17




of euro 72 million. The fair value measurement of                                           the previous year’s equivalent level (32.7%). This
the remaining exchangeable bond option obligation                                           will result in a significant reduction in net deferred
resulting from the BMW Group’s investment in                                                tax liabilities for the financial year 2007. The BMW
Rolls-Royce plc, London, resulted in an expense of                                          Group recorded a net profit of euro 2,143 million for
euro 6 million for the nine-month period, which is                                          the first nine months of 2007, euro 44 million or
included in the line item “Sundry other financial re-                                       2.0 % lower than one year earlier.
sult”. The equivalent expense included in the financial                                           For the first nine months of 2007, the BMW
result for the first nine months of 2006 was euro                                           Group generated earnings per share of common
15 million. The result from other financial instruments                                     stock of euro 3.27 (first nine months 2006: euro
deteriorated in comparison with the corresponding                                           3.33) and earnings per share of preferred stock of
nine-month period last year. Within the financial                                           euro 3.28 (first nine months 2006: euro 3.34).
result, the result from equity accounted investments
decreased by euro 10 million and the result from in-                                        Earnings performance by segment
vestments by euro 22 million. Net interest expense                                          Third-quarter revenues of the Automobiles segment
improved by euro 11 million.                                                                increased by 18.2 %, and the third-quarter profit be-
      The profit before tax for the nine-month period                                       fore tax improved by 15.2 %. Segment revenues for
fell by 17.4 % to euro 2,682 million. Excluding the                                         the nine-month period rose by 10.0 %, whilst seg-
impact of the partial settlement of the exchangeable                                        ment profit fell by 8.8 % to euro 2,114 million.
bond on Rolls-Royce plc, London, shares and the                                                  Third-quarter revenues of the Motorcycles seg-
fair market loss on the option obligation, the profit                                       ment decreased by 6.8 %. Ongoing efficiency im-
before tax fell by only 9.4 % to euro 2,616 million.                                        provements allowed the segment result to improve.
The pre-tax return on sales was 6.6 % (first nine                                           Segment revenues for the nine-month period, at
months 2006: 8.9 %). Excluding the gain on the ex-                                          euro 1,022 million, were up by 1.2 %.The nine-month
changeable bond, the pre-tax return on sales was                                            segment profit before tax, at euro 95 million, im-
6.5 % (first nine months 2006: 7.9 %).                                                      proved by 6.7%.
      The income tax expense decreased by euro                                                   Third-quarter revenues of the Financial Services
522 million. This is primarily attributable to the fact                                     segment increased by 32.0 %. The third-quarter
that the effect of the Business Tax Reform Act 2008,                                        segment profit before tax was up 4.9 % thanks to
adopted by the German Bundesrat (Federal Council)                                           the higher business volume. Nine-month segment
on 6 July 2007, is included for the first time. The                                         revenues and segment result were 21.6 % and
effective tax rate of 20.1% is significantly lower than                                     5.2 % ahead of the comparable figures for 2006.


Profit before tax by segment                                                              3rd quarter           3rd quarter         1 January to          1 January to
in euro million                                                                                2007                  2006         30 September          30 September
                                                                                                                                          2007                  2006



Automobiles                                                                                       704                   611                 2,114                 2,319
Motorcycles                                                                                           5                     4                   95                    89
Financial Services                                                                                191                   182                   563                   535
Reconciliations                                                                                 – 135                   – 77                  – 90                  305
Profit before tax *                                                                               765                   720                2,682                 3,248


Income taxes                                                                                        38                – 268                 – 539               – 1,061
Net profit                                                                                        803                   452                2,143                 2,187
      before tax for the first nine months of 2006 included a gain of euro 375 million arising from the partial settlement of the exchangeable bond on shares in Rolls-Royce plc,
* Profit

 London.
18




02
07
     BMW Group – an Overview
     Automobiles
                                    Reconciliations to the group profit before tax         for repayments of euro 1,573 million (first nine
10   Motorcycles               were negative in the third quarter 2007, with a net         months 2006: euro 3,200 million). The cash inflow
12   Financial Services
14   BMW Stock                 expense of euro 135 million (third quarter 2006: net        from financing activities totalling euro 4,706 million
15
20
     Financial Analysis
     Interim Group Financial
                               expense of euro 77 million). Reconciliations to the         arises in the first nine months of 2007 primarily from
     Statements                group profit before tax for the nine-month period           the issue of bonds and asset-backed financing in-
39   Financial Calendar
                               gave rise to a negative net result of euro 90 million,      struments as well as from an increase in liabilities to
                               a deterioration of euro 395 million compared to the         banks. After adjustment for the effects of exchange-
                               corresponding period last year. This was largely due        rate fluctuations and changes in the composition
                               to the higher gain recognised in the previous year on       of the BMW Group, the various cash flows resulted
                               the partial settlement of the exchangeable bond on          in an increase in cash and cash equivalents of euro
                               shares in Rolls-Royce plc, London.                          501 million (first nine months 2006: decrease of
                                                                                           euro 248 million).
                               Financial position                                               Net interest-bearing assets relating to Industrial
                               The cash flow statements of the BMW Group and its           operations including receivables from Financial
                               sub-groups show the sources and applications of             operations amounted to euro 6,612 million at
                               cash flows for the first nine months of the financial       30 September 2007. This represents an increase
                               years 2006 and 2007, classified into cash flows from        of euro 1,227 million since 31 December 2006. Net
                               operating, investing and financing activities. Cash         interest-bearing assets relating to Industrial opera-
                               and cash equivalents in the cash flow statement             tions comprise cash and cash equivalents (euro
                               correspond to the amount disclosed in the balance           1,548 million), marketable securities relating to
                               sheet. The cash inflow from operating activities in         Industrial operations (euro 2,074 million) and receiv-
                               the first nine months increased by euro 355 million         ables from Financial operations (euro 4,823 million)
                               to euro 7,881 million (first nine months 2006: euro         less financial liabilities relating to Industrial opera-
                               7,526 million).                                             tions. Excluding interest and currency derivatives,
                                     The cash outflow for investing activities for the     the latter amounts to euro 1,833 million.
                               nine-month period amounted to euro 12,065 million
                               and was therefore euro 3,045 million higher than            Net assets
                               one year earlier. Capital expenditure on intangible         The balance sheet total of the BMW Group in-
                               assets and property, plant and equipment resulted           creased by euro 8,268 million or 10.5 % compared
                               in the cash outflow for investing activities increasing     to 31 December 2006. Adjusted for changes in
                               by euro 187 million compared to the previous year.          exchange rates, the balance sheet total would have
                               Cash outflow in conjunction with the net invest-            increased by 12.9%. The main reasons for this in-
                               ment in leased products and receivables from sales          crease on the assets side of the balance sheet were
                               financing increased by euro 2,889 million. 65.3 %           leased-out products (+ 20.1%), inventories (+ 28.6 %)
                               (first nine months 2006: 83.4 %) of the cash outflow        and receivables from sales financing (+ 9.0 %). In
                               for investing activities was covered by the cash in-        the opposite direction, other assets fell by 10.1%.
                               flow from operating activities. The sub-group cash          On the equity and liabilities side of the balance
                               flow statement shows coverage of 162.8 % (first nine        sheet, the increase was due to the increase in equity
                               months 2006: 150.9 %) for Industrial operations.            (+ 9.3 %), financial liabilities (+14.7%) and trade
                               As expected, the cash flow statement of the Financial       payables (+ 24.2 %). By contrast, pension provisions
                               operations sub-group shows that cash inflow from            decreased by 8.5 %.
                               operating activities does not cover cash outflow for             Other investments decreased mainly as a result
                               investing activities due to the high level of capital ex-   of the further settlement of the exchangeable bond
                               penditure on leased products and receivables from           on Rolls-Royce plc, London, shares.
                               sales financing.                                                 Leased-out products increased by euro 2,745
                                     Cash inflow from financing activities includes        million. Excluding the effect of currency fluctuations,
                               inflows of euro 3,014 million from bond issues (first       the increase would have been euro 571 million
                               nine months 2006: euro 4,717 million) and outflows          higher. Receivables from sales financing were up by
                                                            19




9.0 % to euro 33,104 million due to the expanded
business volumes.
      Compared to 31 December 2006, inventories
increased by euro 1,940 million to euro 8,734 million.
This was due to seasonal factors.
      Group equity increased primarily as a result of
the net profit for the period. Within group equity,
accumulated other equity increased by euro 137 mil-
lion. The increase in interest rates gave rise to actu-
arial gains of euro 323 million (net of deferred tax) on
pension obligations.
      By contrast, the fair value measurement of se-
curities fell by euro 118 million, mainly as a result of
the partial settlement of the exchangeable bond on
Rolls-Royce plc, London, shares. Translation differ-
ences reduced accumulated other equity by euro
192 million. The fair values of derivative financial in-
struments increased by euro 124 million.
      The equity ratio of the BMW Group fell overall
by 0.2 percentage points to 24.0 %. The equity ratio
for Industrial operations was 42.1% (31 December
2006: 40.6 %). The equity ratio for Financial opera-
tions was 9.7%, which was 0.7 percentage points
lower than at 31 December 2006.
      Other provisions, at euro 5,279 million, were
euro 257 million below their level at 31 December
2006. The reduction was mainly due to lower obliga-
tions for ongoing operational expenses and to lower
personnel-related obligations. Financing liabilities
increased in the nine-month period mainly as a result
of the higher level of bonds, liabilities to banks and
asset-backed financing transactions.
      Other liabilities, at euro 6,414 million, were euro
558 million higher than at 31 December 2006,
mainly due to an increase in accruals and deferred
income.
20                             Interim Group Financial Statements
                               Group and sub-group Income Statements
                               for the 3rd quarter




02   BMW Group – an Overview
07   Automobiles
                               in euro million                                            Notes                    Group                       Industrial operations 1]           Financial operations 1]
10   Motorcycles                                                                                               2007      2006                    2007        2006                   2007        2006
12   Financial Services
14   BMW Stock
15   Financial Analysis
20   Interim Group Financial   Revenues                                                       [ 5]          13,778        11,557               13,420        11,416                3,665         2,817
     Statements
39   Financial Calendar        Cost of sales                                                  [6]         – 10,902       – 8,918             – 10,843        – 9,134             – 3,294       – 2,484
                               Gross profit                                                                  2,876         2,639                2,577         2,282                  371           333


                               Sales and administrative costs                                 [7]           – 1,228       – 1,177              – 1,076       – 1,051                – 155         – 130
                               Research and development costs                                 [8]             – 723         – 605                – 723         – 605                      –             –
                               Other operating income                                         [9]               144           110                  129             73                   32            44
                               Other operating expenses                                       [9]               – 96          – 85                 – 86          – 67                 – 31          – 28
                               Profit before financial result                                                  973           882                  821           632                  217           219


                                  Result from equity accounted investments                  [10]                 –1              2                  –1              2                     –             –
                                  Other financial result                                    [11]              – 207         – 164                  – 69          – 41               – 100           – 73
                               Financial result                                                               – 208         – 162                  – 70          – 39               – 100           – 73
                               Profit before tax                                                               765           720                  751           593                  117            146


                               Income taxes                                                 [12]                  38        – 268                  120         – 225                  – 85          – 53
                               Net profit                                                                      803           452                  871           368                    32            93


                               Attributable to minority interest                                                   3             3                    3             3                     –             –
                               Attributable to shareholders of BMW AG                                          800           449                  868           365                    32            93


                               Earnings per share
                               of common stock in euro                                      [13]               1.22          0.69
                               Earnings per share
                               of preferred stock 2] in euro                                [13]               1.22          0.69
                               1] before consolidation of transactions between the sub-groups
                               2] In computing earnings per share of preferred stock, earnings to cover the additional dividend of euro 0.02 per share of preferred stock are spread over the quarters of the
                                  corresponding financial year.
Interim Group Financial Statements                                                                                                                                               21

Group and sub-group Income Statements
for the period from 1 January to 30 September




in euro million                                            Notes                    Group                       Industrial operations 1]           Financial operations 1]
                                                                                2007      2006                    2007        2006                   2007        2006



Revenues                                                       [ 5]          40,412        36,368               39,957        36,417               10,373         8,582
Cost of sales                                                  [6]         – 31,468 – 28,062                  – 31,970 – 29,025                   – 9,275        – 7,631
Gross profit                                                                  8,944         8,306                7,987         7,392                1,098           951


Sales and administrative costs                                 [7]          – 3,946       – 3,620              – 3,507       – 3,254                 – 442         – 380
Research and development costs                                 [8]           – 2,195       – 1,812              – 2,195       – 1,812                      –             –
Other operating income                                         [9]               413           465                  326           371                  130           122
Other operating expenses                                       [9]             – 312         – 308                – 248         – 265                – 116           – 76
Profit before financial result                                                2,904         3,031                2,363         2,432                  670           617


   Result from equity accounted investments                  [10]                   2            12                    2            12                     –             –
   Other financial result                                    [11]              – 224           205                  – 58          333                  – 55          – 29
Financial result                                                               – 222           217                  – 56          345                  – 55          – 29
Profit before tax                                                             2,682         3,248                2,307         2,777                  615            588


Income taxes                                                 [12]              – 539       – 1,061                – 352         – 911                – 240         – 196
Net profit                                                                    2,143         2,187                1,955         1,866                  375            392


Attributable to minority interest                                                   6             4                    6             4                     –             –
Attributable to shareholders of BMW AG                                        2,137         2,183                1,949         1,862                  375            392


Earnings per share
of common stock in euro                                      [13]               3.27          3.33
Earnings per share
of preferred stock 2] in euro                                [13]               3.28          3.34
1] before consolidation of transactions between the sub-groups
2] In computing earnings per share of preferred stock, earnings to cover the additional dividend of euro 0.02 per share of preferred stock are spread over the quarters of the
   corresponding financial year.
22                             Interim Group Financial Statements
                               Group and sub-group Balance Sheets




02   BMW Group – an Overview
07   Automobiles
                               Assets                                              Notes                  Group            Industrial operations*       Financial operations*
10   Motorcycles               in euro million                                                   30. 9.2007 31.12.2006   30. 9.2007 31.12.2006      30. 9.2007 31.12.2006
12   Financial Services
14   BMW Stock
15   Financial Analysis
20   Interim Group Financial   Intangible assets                                     [14]           5,547       5,312        5,426        5,276           121             36
     Statements
39   Financial Calendar        Property, plant and equipment                         [15]          11,027      11,285       11,002       11,260             25            25
                               Leased products                                       [16]          16,387      13,642          276          254        19,242        16,364
                               Investments accounted for
                               using the equity method                               [17]              47          60           47            60             –             –
                               Other investments                                     [17]             277         401          258          388             19            13
                               Receivables from sales financing                      [18]          19,614      17,865             –            –       19,614        17,865
                               Financial assets                                      [19]            1,114        816           74            61        1,040           755
                               Deferred tax                                          [20]             741         755        1,165         1,192       – 1,870       – 1,828
                               Other assets                                          [21]             436         378        1,022          875           341           255
                               Non-current assets                                                  55,190     50,514       19,270       19,366        38,532        33,485


                               Inventories                                           [22]           8,734       6,794        8,725        6,784              9            10
                               Trade receivables                                                    2,517       2,258        2,469        2,214             48            44
                               Receivables from sales financing                      [18]          13,490      12,503             –            –       13,490        12,503
                               Financial assets                                      [19]           3,319       3,134        2,285        2,348         1,034           786
                               Current tax                                           [20]             292         246          276          222             16            24
                               Other assets                                          [21]           1,946       2,272        5,381        5,574           814           772
                               Cash and cash equivalents                                            1,837       1,336        1,548        1,235           289           101
                               Current assets                                                      32,135     28,543       20,684       18,377        15,700        14,240




                               Total assets                                                        87,325     79,057       39,954       37,743        54,232        47,725


                               Total assets adjusted for
                               asset backed financing transactions                                 81,703      74,556             –            –       48,610        43,224
                               * before   consolidation of transactions between the sub-groups
                                                                                                                                                 23




Equity and liabilities                              Notes                  Group            Industrial operations*       Financial operations*
in euro million                                                   30. 9.2007 31.12.2006   30. 9.2007 31.12.2006      30. 9.2007 31.12.2006



Subscribed capital                                                     654         654
Capital reserves                                                     1,911       1,911
Revenue reserves                                                    19,800      18,121
Accumulated other equity                                            – 1,423     – 1,560
Treasury shares                                                        – 34          –
Minority interest                                                         9          4
Equity                                                [23]         20,917      19,130       16,837       15,315         5,286         4,965


Pension provisions                                                   4,590       5,017        4,556        4,983             34            34
Other provisions                                      [24]           2,800       2,865        2,503        2,462           297           403
Deferred tax                                          [25]           2,888       2,758        2,234        2,012           369           464
Financial liabilities                                 [26]          21,478      18,800          715          882        20,763        17,918
Other liabilities                                     [27]           1,986       1,932        1,487        1,458         1,960         1,732
Non-current provisions
and liabilities                                                    33,742      31,372       11,495       11,797        23,423        20,551


Other provisions                                      [24]           2,479       2,671        2,286        2,489           218           207
Current tax                                           [25]             784         567          639          437           145           130
Financial liabilities                                 [26]          20,334      17,656        1,285        1,407        19,049        16,249
Trade payables                                                       4,641       3,737        3,986        3,288           655           449
Other liabilities                                     [27]           4,428       3,924        3,426        3,010         5,456         5,174
Current provisions and liabilities                                 32,666      28,555       11,622       10,631        25,523        22,209


Total equity and liabilities                                        87,325     79,057       39,954       37,743        54,232        47,725


Total equity and liabilities adjusted for
asset backed financing transactions                                 81,703      74,556             –            –       48,610        43,224
* before   consolidation of transactions between the sub-groups
24                             Interim Group Financial Statements
                               Group and sub-group Cash Flow Statements
                               for the period from 1 January to 30 September




02   BMW Group – an Overview
07   Automobiles
                               in euro million                                                                          Group
10   Motorcycles                                                                                                2007              2006
12   Financial Services
14   BMW Stock
15   Financial Analysis
20   Interim Group Financial   Net profit                                                                       2,143             2,187
     Statements
39   Financial Calendar        Depreciation of leased products                                                 3,521             2,864
                               Depreciation and amortisation of tangible, intangible and investment assets     2,685             2,394
                               Change in provisions                                                              100                –1
                               Change in deferred tax                                                             12               301
                               Change in net current assets and other items                                     – 580             – 219
                               Cash inflow from operating activities                                           7,881             7,526


                               Investment in intangible assets and property, plant and equipment              – 2,804           – 2,617
                               Net investment in leased products and receivables from sales financing         – 9,250           – 6,361
                               Other                                                                             – 11              – 42
                               Cash outflow from investing activities                                        – 12,065           – 9,020


                               Cash inflow /outflow from financing activities                                  4,706             1,171


                               Effect of exchange rate and changes in composition of group on
                               cash and cash equivalents                                                         – 21               75


                               Change in cash and cash equivalents                                               501             – 248


                               Cash and cash equivalents at 1 January                                           1,336            1,621
                               Cash and cash equivalents at 30 September                                       1,837             1,373
                                                                                                                                      25




   Industrial operations       Financial operations
  2007               2006     2007               2006



 1,955            1,866        375              392     Net profit
     3                 3     3,233            2,693     Depreciation of leased products
 2,668            2,362         17                32    Depreciation and amortisation of tangible, intangible and investment assets
   251              – 85      – 151               84    Change in provisions
   – 72             306        136                41    Change in deferred tax
  – 329            – 454      – 205             286     Change in net current assets and other items
 4,476            3,998      3,405            3,528     Cash inflow from operating activities


– 2,701          – 2,564      – 103             – 53    Investment in intangible assets and property, plant and equipment
   – 25             – 59    – 9,225          – 6,302    Net investment in leased products and receivables from sales financing
   – 24             – 26        13              – 16    Other
– 2,750         – 2,649     – 9,315         – 6,371     Cash outflow from investing activities


– 1,403         – 1,751      6,109            2,922     Cash inflow /outflow from financing activities


                                                        Effect of exchange rate and changes in composition of group on
   – 10              93        – 11             – 18    cash and cash equivalents


   313            – 309        188               61     Change in cash and cash equivalents


 1,235            1,372        101              249     Cash and cash equivalents at 1 January
 1,548            1,063        289              310     Cash and cash equivalents at 30 September
26                             Interim Group Financial Statements
                               Statement of Changes in Equity




02   BMW Group – an Overview
07   Automobiles
                               in euro million              Subscribed      Capital Revenue                Accumulated other equity              Treasury Minority     Total
10   Motorcycles                                                capital   reserves reserves                                                        shares interest
12   Financial Services                                                                             Trans- Fair value Derivative      Pension
14   BMW Stock                                                                                       lation measure-   financial       obliga-
15   Financial Analysis                                                                       differences ment of        instru-         tions
20   Interim Group Financial                                                                               marketable    ments
     Statements
                                                                                                            securities
39   Financial Calendar



                               31 December 2005                   674      1,971    16,351        – 646         562         29     – 1,462        – 506         –    16,973
                               Acquisition of treasury shares        –          –        –             –           –          –             –      – 282        –     – 282
                               Withdrawal of shares
                               from circulation                   – 20       – 60    – 679             –           –          –             –       759         –         –
                               Dividends paid                        –          –    – 419             –           –          –             –          –        –     – 419
                               Translation differences               –          –        –         – 169           –        –2            –5           –        –     – 176
                               Financial instruments                 –          –        –             –       – 375       130              –          –        –     – 245
                               Actuarial gains and losses
                               on pension obligations                –          –        –             –           –          –          305           –        –      305
                               Deferred tax on transactions
                               recognised directly in equity         –          –        –             –           1       – 37        – 117           –        –     – 153
                               Net profit
                               30 September 2006                     –          –    2,183             –           –          –             –          –        4     2,187
                               Other changes                         –          –        –             –           –          –             –          –       –2       –2
                               30 September 2006                  654      1,911    17,436        – 815         188        120     – 1,279          – 29        2    18,188



                               31 December 2006                   654      1,911    18,121        – 837         214        178        – 1,115          –        4    19,130
                               Acquisition of treasury shares        –          –        –             –           –          –             –       – 34        –      – 34
                               Dividends paid                        –          –    – 458             –           –          –             –          –        –     – 458
                               Translation differences               –          –        –         – 209           –          2            15          –       –1     – 193
                               Financial instruments                 –          –        –             –       – 118       178              –          –        –       60
                               Actuarial gains and losses
                               on pension obligations                –          –        –             –           –          –          631           –        –      631
                               Deferred tax on transactions
                               recognised directly in equity         –          –        –             –           –       – 54        – 308           –        –     – 362
                               Net profit
                               30 September 2007                     –          –    2,137             –           –          –             –          –        6     2,143
                               30 September 2007                  654      1,911    19,800      – 1,046           96       304         – 777        – 34        9    20,917
                               See also Note [23]
Interim Group Financial Statements                                                                             27

Statement of Income and Expenses recognised directly in Equity
for the period from 1 January to 30 September




in euro million                                                                                 2007    2006



Fair value gains and losses on available-for-sale investments recognised directly in equity    – 118   – 375
Fair value gains and losses on financial instruments used for hedging purposes
recognised directly in equity                                                                   180     128
Exchange differences arising on the translation of foreign subsidiaries                        – 209   – 169
Actuarial gains and losses on defined benefit pension and similar obligations                   646     300
Deferred tax on gains and losses recognised directly in equity                                 – 362   – 153
Gains and losses recognised directly in equity                                                  137    – 269


Profit after tax attributable to shareholders of BMW AG                                        2,137   2,183
Aggregate amount of net profit for period and gains and losses recognised directly in equity   2,274   1,914
28                                Interim Group Financial Statements
                                  Notes to the Interim Group Financial Statements to 30 September 2007
                                  Accounting Principles and Policies




02
07
     BMW Group – an Overview
     Automobiles
                               [1] Basis of preparation                                      BMW Holding B.V., The Hague, BMW Österreich
10   Motorcycles                   The Group financial statements of BMW AG at 31 De-        Holding GmbH, Steyr, BMW (US) Holding Corp.,
12   Financial Services
14   BMW Stock                     cember 2006 were drawn up in accordance with              Wilmington, Del., BMW España Finance S. L.,
15
20
     Financial Analysis
     Interim Group Financial
                                   International Financial Reporting Standards (IFRSs),      Madrid, and BMW Holding Malaysia Sdn Bhd, Kuala
     Statements                    as applicable in the EU. The interim Group financial      Lumpur, are allocated to Industrial operations. The
39   Financial Calendar
                                   statements (Interim Report) at 30 September 2007,         main business transactions between Industrial and
                                   which have been prepared in accordance with Inter-        Financial operations, which are eliminated in the
                                   national Accounting Standard (IAS) 34 (Interim Finan-     Group financial statements, are internal sales of
                                   cial Reporting), have been drawn up using, in all         products, the provision of funds for Group compa-
                                   material respects, the same accounting methods as         nies and the related interest. These additional dis-
                                   in the 2006 Group financial statements. All Interpre-     closures allow the assets, liabilities, financial position
                                   tations of the International Financial Reporting Inter-   and performance of Industrial operations and Finan-
                                   pretations Committee (IFRIC) which are mandatory          cial operations to be presented, in accordance with
                                   at 30 September 2007 have also been applied. The          the recognition and measurement principles stipu-
                                   interim report also complies with German Accounting       lated by IFRSs, as if they were two separate groups.
                                   Standard No. 6 (GAS 6) – Interim Financial Reporting –    This information is provided on a voluntary basis.
                                   issued by the German Accounting Standards Com-                 In conjunction with the refinancing of financial
                                   mittee e.V. (GASC). The interim Group financial           services business, a significant volume of receiv-
                                   statements have neither been audited nor reviewed         ables arising from retail customer and dealer financ-
                                   by the group auditors, KPMG Deutsche Treuhand-            ing is sold. Similarly, rights and obligations relating
                                   Gesellschaft, Aktiengesellschaft, Wirtschaftsprüfungs-    to leases are sold. The sale of receivables is a well
                                   gesellschaft.                                             established instrument used by industrial compa-
                                        Further information about the Group’s accounting     nies. These transactions are usually in the form of
                                   principles and policies is contained in the BMW           asset backed financing transactions involving the
                                   Group financial statements at 31 December 2006.           sale of a portfolio of receivables to a trust which, in
                                   The Group currency is the euro. All amounts are           turn, issues marketable securities to refinance the
                                   disclosed in millions of euros (euro million) unless      purchase price. The BMW Group continues to
                                   stated otherwise.                                         “service” the receivables and receives an appropri-
                                        In order to support the sale of its products, the    ate fee for these services. In accordance with IAS 27
                                   BMW Group provides various financial services –           (Consolidated and Separate Financial Statements)
                                   mainly loan and lease financing – to retail customers     and the interpretation contained in SIC-12 (Consoli-
                                   and to dealers. The inclusion of the financial services   dation – Special Purpose Entities) such assets re-
                                   activities of the Group therefore has an impact on        main in the Group financial statements although they
                                   the interim Group financial statements. In order to       have been legally sold. Gains and losses relating to
                                   provide a better insight into the assets, liabilities,    the sale of such assets are not recognised until the
                                   financial position and performance of the Group, ad-      assets are removed from the Group balance sheet
                                   ditional information is presented in the BMW Group        on transfer of the related significant risks and rewards.
                                   financial statements for Industrial operations and        The balance sheet value of the assets sold at 30 Sep-
                                   Financial operations. Financial operations include        tember 2007 totalled euro 5.6 billion (31 December
                                   financial services and the activities of the Group        2006: euro 4.5 billion). For an additional understand-
                                   financing companies. The operating interest income        ing of the asset, liability and financial position of the
                                   and expense of Financial operations are included in       BMW Group, the Group balance sheet contains a
                                   revenues and cost of sales respectively. The holding      supplementary disclosure of the balance sheet total
                                   companies BMW (UK) Holdings Ltd., Bracknell,              adjusted for assets which have been sold.
                                                                                                                    29




[2] Consolidated companies                                     LHS Leasing- und Handelsgesellschaft Deutschland
    The BMW Group financial statements for the third           mbH, Stuttgart, and one trust were consolidated
    quarter 2007 include, besides BMW AG, 47 German            for the first time in the nine-month period ended
    and 152 foreign subsidiaries. This includes 17 spe-        30 September 2007.
    cial securities funds and 20 trusts (special purpose             BMW Renting Iberica S. L., Madrid, (as a result
    entities), almost all of which are used for asset backed   of its merger into Alphabet Fleet Services España
    financing.                                                 S.L., Madrid) and British Motor Holding Ltd., Bracknell,
          One trust was consolidated for the first time in     ceased to be consolidated companies during the
    the third quarter 2007.                                    nine-month period.
          BMW Asia Pte. Ltd., Singapore, BMW Melbourne               Compared to the third quarter last year, 11 Ger-
    Pty. Ltd., Melbourne, BMW Sydney Pty. Ltd., Sydney,        man and foreign subsidiaries and three trusts were
    BMW Financial Services Danmark A/S, Kolding,               consolidated for the first time. In addition, three
    BMW Renting (Portugal) Lda., Lisbon, BMW Acquisi-          foreign subsidiaries and three trusts ceased to be
    tions Ltda., São Paulo, BMW Financeira S. A. Credito,      consolidated companies.
    Financiamento e Investimento, São Paulo, BMW                     The changes in the composition of the Group
    Leasing do Brasil, S. A., São Paulo, BMW Financial         do not have a material impact on the earnings per-
    Services New Zealand Ltd., Auckland, BMW Fuhr-             formance, financial position and net assets of the
    parkmanagement Beteiligungs GmbH, Stuttgart,               Group.


[3] Business acquisitions and disposals                        Beteiligungs GmbH, Stuttgart. This entity and its
    The acquisition of DEKRA SüdLeasing Services               subsidiary, LHS Leasing- und Handelsgesellschaft
    GmbH, Stuttgart, and its subsidiaries, LHS Leasing-        Deutschland mbH, Stuttgart, were consolidated for
    und Handelsgesellschaft Deutschland mbH, Stutt-            the first time in the second quarter.
    gart, DSL Fleetservices GmbH, Stuttgart, LHS                     The provisional acquisition cost is euro 121 mil-
    Autoland GmbH, Stuttgart, and MOBIDIG GmbH,                lion. Based on the definitive purchase price alloca-
    Stuttgart, was completed on 2 April 2007. 100 % of         tion, the following carrying amounts and fair values
    the shares were acquired in each case. The name            were attributed to the assets and liabilities of the
    of DEKRA SüdLeasing Services GmbH, Stuttgart,              acquired companies at the acquisition date:
    has been changed to BMW Fuhrparkmanagement

   in euro million                                                                          Carrying         Fair
                                                                                            amount          value



   Assets
   Intangible assets and property, plant and equipment                                            2           28
   Leased products                                                                             515           515
   Investments in subsidiaries                                                                    3            3
   Receivables from sales financing                                                            230           230
   Other assets                                                                                  15           15


   Liabilities
   Provisions                                                                                    23           23
   Financial liabilities                                                                       699           699
   Other liabilities                                                                             35           45
   Net assets acquired                                                                            8           24
   Acquisition cost                                                                                          121
   Goodwill                                                                                                   97


   Allocation by segment:
      Automobiles                                                                                             33
      Financial Services                                                                                      64
30                                Interim Group Financial Statements
                                  Notes to the Interim Group Financial Statements to 30 September 2007
                                  Notes to the Income Statement




02
07
     BMW Group – an Overview
     Automobiles
                                  The following identifiable assets have been recog-          since first-time consolidation amounts to euro
10   Motorcycles                  nised and included in intangible assets, measured at        3.2 million.
12   Financial Services
14   BMW Stock                    fair value:                                                      Net revenues of the two entities since first-time
15
20
     Financial Analysis
     Interim Group Financial
                                  – contract portfolio                                        consolidation amount to euro 231 million, including
     Statements                   – customer relationships                                    euro 118 million recorded in the third quarter.
39   Financial Calendar
                                  – contract management system                                     In addition, after obtaining approval from the
                                  These intangible assets are amortised systematically        relevant local authorities, BMW Holding B.V., The
                                  over the following useful lives:                            Hague, acquired SimeLease (Malaysia) Sdn Bhd,
                                  – contract portfolio:                 4 years               Kuala Lumpur, and that entity’s subsidiary, Sime-
                                  – customer relationships:             7 years               Credit (Malaysia) Sdn Bhd, Kuala Lumpur, on 13 April
                                  – contract management system: 5 years                       2007. The names of these entities have been
                                  The remainder of the surplus (euro 97 million) of the       changed to BMW Lease (Malaysia) Sdn Bhd, Kuala
                                  acquisition cost over the fair value of the identifiable    Lumpur, and BMW Credit (Malaysia) Sdn Bhd, Kuala
                                  net assets acquired is largely attributable to poten-       Lumpur.
                                  tial synergy benefits which will arise from the future           These entities are not material in terms of the
                                  growth of the group’s fleet business.                       group’s earnings performance, financial position and
                                        BMW Fuhrparkmanagement Beteiligungs                   net assets.
                                  GmbH, Stuttgart, and LHS Leasing- und Handels-                   BMW Group’s investment in TRITEC Motors
                                  gesellschaft Deutschland mbH, Stuttgart, recorded           Ltda., Campo Largo, was sold to the Chrysler Group
                                  a net loss of euro 1.3 million in the third quarter         on 11 July 2007 in line with agreements in place
                                  2007. The net loss generated by these two entities          between the various parties.


                               [4] New financial reporting rules                              Benefit Asset, Minimum Funding Requirements and
                                   (a) Financial reporting rules coming into force in the     their Interaction), which is mandatory for financial
                                       third quarter 2007                                     periods commencing on or after 1 January 2008.
                                   No new financial reporting rules came into force                 The IASB also issued IAS 1 (Presentation of
                                   during the third quarter 2007.                             Financial Statements) in a revised version during the
                                   (b) New financial reporting rules issued during the        third quarter. The revised Standard is mandatory
                                       third quarter 2007                                     for financial years commencing on or after 1 January
                                   In the third quarter 2007, the International Financial     2009.
                                   Reporting Interpretations Committee issued Inter-                These new financial rules will not have a signifi-
                                   pretation IFRIC 14 (IAS 19 – The Limit on a Defined        cant impact on the BMW Group.


                               [5] Revenues
                                   Revenues by activity comprise the following:

                                  in euro million                                            3rd quarter   3rd quarter     1 January to     1 January to
                                                                                                  2007          2006     30 September     30 September
                                                                                                                                 2007             2006



                                  Sales of products and related goods                           10,520         9,021           31,251           28,711
                                  Income from lease instalments                                  1,324         1,070            3,739            3,073
                                  Sales of products previously leased to customers               1,076           754            2,991            2,524
                                  Interest income on loan financing                                632           504            1,756            1,418
                                  Other income                                                     226           208              675              642
                                  Revenues                                                     13,778        11,557           40,412           36,368



                                  An analysis of revenues by business segment is shown in the segment information on pages 37 to 38.
                                                                                                                             31




 [6] Cost of sales                                              period from 1 January to 30 September 2007, euro
     Cost of sales in the third quarter include euro            7,979 million (first nine months 2006: euro 6,556 mil-
     2,863 million (third quarter 2006: euro 2,135 mil-         lion) relates to the financial services business.
     lion) relating to financial services business. For the


 [7] Sales and administrative costs                                   Administrative costs in the third quarter and first
     Sales costs in the third quarter amounted to euro          nine months amounted to euro 213 million (third
     1,015 million (third quarter 2006: euro 963 million).      quarter 2006: euro 214 million) and euro 720 million
     For the first nine months of 2007, they amounted           (first nine months 2006: euro 667 million). These
     to euro 3,226 million (first nine months 2006: euro        comprise expenses for administration which are not
     2,953 million). Sales costs comprise mainly market-        attributable to development, production or sales
     ing, advertising and sales personnel costs.                functions.


 [8] Research and development costs                             2006: euro 238 million). Research and development
     Third-quarter research and development costs               costs for the first nine months of 2007 amounted
     amounting to euro 723 million (third quarter 2006:         to euro 2,195 million (first nine months 2006: euro
     euro 605 million) comprise all research costs and          1,812 million). This includes amortisation on capi-
     development costs not recognised as assets as              talised development costs of euro 800 million (first
     well as the amortisation of capitalised development        nine months 2006: euro 608 million).
     costs amounting to euro 283 million (third quarter


 [9] Other operating income and expenses                        reversal/allocation to provisions and gains arising on
     The main items included in other operating income          the disposal of intangible assets and property, plant
     and expenses are gains and losses from foreign cur-        and equipment.
     rency fluctuations, income/expense arising from the


[10] Result from equity accounted investments                   the nine-month period, the equivalent figure was a
     The result from equity accounted investments in the        net profit of euro 2 million (first nine months 2006:
     third quarter was a net expense of euro 1 million          euro 12 million). This includes the result of the joint
     (third quarter 2006: net profit of euro 2 million). For    venture, BMW Brilliance Automotive Ltd., Shenyang.


[11] Other financial result

    in euro million                                            3rd quarter   3rd quarter     1 January to     1 January to
                                                                    2007          2006     30 September     30 September
                                                                                                   2007             2006



    Result on investments                                             –6             16              –5                17
    Net interest expense                                             – 92          – 73            – 174            – 185
    Sundry other financial result                                   – 109         – 107             – 45             373
    Other financial result                                         – 207         – 164            – 224              205
32                                 Interim Group Financial Statements
                                   Notes to the Interim Group Financial Statements to 30 September 2007
                                   Notes to the Balance Sheet




02
07
     BMW Group – an Overview
     Automobiles
                               [12] Income taxes
10   Motorcycles                    Taxes on income comprise the following:
12   Financial Services
14   BMW Stock
15   Financial Analysis            in euro million                                                      3rd quarter     3rd quarter     1 January to     1 January to
20   Interim Group Financial                                                                                 2007            2006     30 September     30 September
     Statements                                                                                                                               2007             2006
39   Financial Calendar



                                   Current tax expense                                                        223             233              649              794
                                   Deferred tax expense                                                      – 261              35            – 110             267
                                   Income taxes                                                               – 38            268              539            1,061


                                   The effective tax rate for the third quarter was 20.1%                Business Tax Reform Act 2008 adopted by the
                                   (third quarter 2006: 32.7%).                                          German Bundesrat (Federal Council) on 6 July
                                        The effective tax rate for the first nine months                 2007.
                                   of 2007 includes, for the first time, the impact of the


                               [13] Earnings per share
                                    The computation of earnings per share is based on the following figures:

                                                                                                        3rd quarter     3rd quarter     1 January to     1 January to
                                                                                                             2007            2006     30 September     30 September
                                                                                                                                              2007             2006



                                   Profit attributable to the shareholders             euro million         800.2           448.9           2,137.1          2,183.4


                                   Profit attributable to common stock       euro million (rounded)         737.3           413.3           1,968.4         2,010.9
                                   Profit attributable to preferred stock    euro million (rounded)           62.9            35.6           168.7            172.5


                                   Average number of
                                   common stock shares in circulation                      number     601,995,196     601,995,196     601,995,196       602,617,165
                                   Average number of
                                   preferred stock shares in circulation                   number      51,446,162      51,446,162       51,446,162       51,446,162


                                   Earnings per share of common stock                         euro           1.22            0.69             3.27             3.33
                                   Earnings per share of preferred stock                      euro           1.22            0.69             3.28             3.34



                                   Earnings per share are calculated for common and                      euro 0.02 per share of preferred stock are spread
                                   preferred stock by dividing the net profit after mi-                  over the quarters of the corresponding financial year.
                                   nority interests, as attributable to each category                    Earnings per share of preferred stock are computed
                                   of stock, by the average number of shares in circu-                   on the basis of the number of preferred stock shares
                                   lation.                                                               entitled to receive a dividend in each of the relevant
                                        In computing earnings per share of preferred                     financial years. Diluted earnings per share were not
                                   stock, earnings to cover the additional dividend of                   applicable in either of the reporting periods.


                               [14] Intangible assets                                                    lion). Expenditure for capitalised development costs
                                    Intangible assets comprise capitalised development                   in the first nine months was euro 904 million (first
                                    costs on vehicle and engine projects as well as sub-                 nine months 2006: euro 970 million). Amortisation
                                    sidies for tool costs, licences, purchased develop-                  amounted to euro 800 million (first nine months
                                    ment projects and software. Capitalised development                  2006: euro 608 million).
                                    costs at 30 September 2007 amounted to euro                               In addition, intangible assets include goodwill of
                                    4,914 million (31 December 2006: euro 4,810 mil-                     euro 163 million (31 December 2006: euro 66 mil-
                                                                                                                    33




    lion). This comprises goodwill arising on earlier          SüdLeasing Services GmbH, Stuttgart, and LHS
    business acquisitions within the softlab Group and         Leasing und Handelsgesellschaft Deutschland
    additions resulting from the acquisition of DEKRA          mbH, Stuttgart.


[15] Property, plant and equipment                             lion). The depreciation expense for the same period
     Capital expenditure for property, plant and equip-        amounted to euro 1,807 million (first nine months
     ment in the first nine months of 2007 was euro            2006: euro 1,689 million).
     1,697 million (first nine months 2006: euro 1,572 mil-


[16] Leased products                                           The translation of foreign currency financial state-
     Additions to leased products and depreciation             ments resulted in a net negative translation differ-
     thereon amounted to euro 7,726 million (first nine        ence of euro 635 million (first nine months 2006: net
     months 2006: euro 6,319 million) and euro 1,575           negative translation difference of euro 548 million).
     million (first nine months 2006: euro 1,216 million)      First-time consolidations gave rise to net additions
     respectively. Disposals amounted to euro 3,523 mil-       of euro 752 million.
     lion (first nine months 2006: euro 2,916 million).


[17] Investments accounted for using the equity                    Other investments relate primarily to invest-
     method and other investments                              ments in non-consolidated subsidiaries and to equity
     Investments accounted for using the equity method         investments in other entities.
     relate to interests in the joint venture BMW Brilliance
     Automotive Ltd., Shenyang.


[18] Receivables from sales financing                               Receivables from sales financing include euro
     Receivables from sales financing totalling euro           19,614 million (31 December 2006: euro 17,865 mil-
     33,104 million (31 December 2006: euro 30,368 mil-        lion) with a remaining term of more than one year.
     lion) relate to credit financing for retail customers
     and dealers and to finance leases.


[19] Financial assets
     Financial assets comprise:

    in euro million                                                                     30. 9. 2007   31.12. 2006



    Interest and currency derivatives                                                       1,560          1,321
    Marketable securities and investment funds                                              2,100          2,034
    Loans to third parties                                                                      29            67
    Other                                                                                     744           528
    Financial assets                                                                       4,433          3,950
       thereof non-current                                                                   1,114          816
       thereof current                                                                      3,319          3,134


    The increase in interest and currency derivatives          due to changed exchange rate parities with the US
    was attributable primarily to increases in fair values     dollar.
34




02
07
     BMW Group – an Overview
     Automobiles
                               [20] Income tax assets
10   Motorcycles                    Income tax assets can be analysed as follows:
12   Financial Services
14   BMW Stock
15   Financial Analysis            30 September 2007                                                        Maturity     Maturity          Total
20   Interim Group Financial       in euro million                                                   within one year    later than
     Statements                                                                                                          one year
39   Financial Calendar



                                   Deferred tax                                                                   –          741           741
                                   Current tax                                                                 175           117           292
                                   Income tax assets                                                           175           858         1,033



                                   31 December 2006                                                         Maturity     Maturity          Total
                                   in euro million                                                   within one year    later than
                                                                                                                         one year



                                   Deferred tax                                                                   –          755           755
                                   Current tax                                                                 123           123           246
                                   Income tax assets                                                           123           878         1,001




                               [21] Other assets

                                   in euro million                                                                     30. 9. 2007   31.12. 2006



                                   Other taxes                                                                               575           584
                                   Receivables from subsidiaries                                                             420           693
                                   Receivables from other companies in which an investment is held                           133           202
                                   Prepayments                                                                               687           683
                                   Sundry other assets                                                                       567           488
                                   Other assets                                                                           2,382          2,650
                                      thereof non-current                                                                    436           378
                                      thereof current                                                                      1,946          2,272



                               [22] Inventories
                                    Inventories comprise the following:

                                   in euro million                                                                     30. 9. 2007   31.12. 2006



                                   Raw materials and supplies                                                                790           689
                                   Work in progress, unbilled contracts                                                      936           911
                                   Finished goods                                                                          6,034          4,280
                                   Goods for resale                                                                          974           914
                                   Inventories                                                                            8,734          6,794


                                   The increase in finished goods was due to seasonal factors.
                                                                                                                   35




[23] Equity                                                  acquire treasury shares was rescinded.The authorisa-
     The Group Statement of Changes in Equity is shown       tion from 15 May 2007 is valid until 14 November
     on page 26.                                             2008. It has not yet been decided whether or the
                                                             extent to which the authorisation will be used.
    Number of shares issued                                         During the first nine months of 2007, the BMW
    At 30 September 2007, common stock issued by             Group acquired 750,000 shares of BMW preferred
    BMW AG was divided into 601,995,196 shares with          stock at an average price of euro 45.48 per share.
    a par-value of one euro. Preferred stock issued by       It is intended to issue these shares to employees
    BMW AG was divided into 52,196,162 shares with a         during the financial year 2007 at a reduced price in
    par-value of one euro, unchanged from the previous       conjunction with an employee share scheme. These
    year. Unlike the common stock, no voting rights are      shares of preferred stock are subject to a vesting
    attached to the preferred stock. All of the company’s    period of four years.
    stock is issued to bearer. Preferred stock bears an
    additional dividend of euro 0.02 per share.              Equity attributable to shareholders
         At the Annual General Meeting on 15 May 2007,       Equity attributable to shareholders of BMW AG at
    the shareholders authorised the Board of Manage-         30 September 2007 amounted to euro 20,908 mil-
    ment to acquire treasury shares via the stock ex-        lion (31 December 2006: euro 19,126 million).
    change, up to a maximum of 10 % of the share capital           Equity attributable to minority interests amounted
    in place at the date of the resolution and to withdraw   to euro 9 million (31 December 2006: euro 4 mil-
    these shares from circulation without any further        lion). This includes a minority interest of euro 6 mil-
    resolution by the Annual General Meeting. At the         lion in the results for the period (31 December 2006:
    same time, the authorisation from 16 May 2006 to         euro 6 million).


[24] Other provisions                                           Current provisions at 30 September 2007
     Other provisions, at euro 5,279 million (31 December    amounted to euro 2,479 million (31 December
     2006: euro 5,536 million) include primarily person-     2006: euro 2,671 million).
     nel-related obligations and obligations for on-going
     operational expenses.


[25] Income tax liabilities

    30 September 2007                                                        Maturity     Maturity         Total
    in euro million                                                   within one year    later than
                                                                                          one year



    Deferred tax                                                                   –        2,888        2,888
    Current tax                                                                 419           365          784
    Income tax liabilities                                                      419        3,253         3,672



    31 December 2006                                                         Maturity     Maturity         Total
    in euro million                                                   within one year    later than
                                                                                          one year



    Deferred tax                                                                   –        2,758        2,758
    Current tax                                                                 206           361          567
    Income tax liabilities                                                      206        3,119         3,325



    Current tax liabilities of euro 784 million (31 Decem-   provisions and euro 119 million (31 December 2006:
    ber 2006: euro 567 million) comprises euro 665 mil-      euro 88 million) for taxes payable.
    lion (31 December 2006: euro 479 million) for tax
36                                  Interim Group Financial Statements
                                    Notes to the Interim Group Financial Statements to 30 September 2007
                                    Other disclosures




02
07
     BMW Group – an Overview
     Automobiles
                               [26] Financial liabilities
10   Motorcycles                    Financial liabilities include all obligations of the BMW Group relating to financing activities and comprise:
12   Financial Services
14   BMW Stock
15   Financial Analysis             in euro million                                                                           30. 9. 2007   31.12. 2006
20   Interim Group Financial
     Statements
39   Financial Calendar
                                    Bonds                                                                                        17,332        16,420
                                    Liabilities to banks                                                                          6,994          4,288
                                    Liabilities from customer deposits (banking)                                                  5,776          5,781
                                    Commercial paper                                                                              4,634          4,154
                                    Asset backed financing transactions                                                           5,622          4,501
                                    Interest and currency derivatives                                                               617           596
                                    Other                                                                                           837           716
                                    Financial liabilities                                                                       41,812         36,456
                                       thereof non-current                                                                       21,478        18,800
                                       thereof current                                                                           20,334        17,656


                                    Other financial liabilities relate primarily to obligations recognised under finance leases.


                               [27] Other liabilities
                                    Other liabilities comprise the following items:

                                    in euro million                                                                           30. 9. 2007   31.12. 2006



                                    Other taxes                                                                                     576           553
                                    Social security                                                                                   39            41
                                    Advance payments from customers                                                                 390           278
                                    Deposits received                                                                               151           143
                                    Liabilities to subsidiaries                                                                       30            40
                                    Liabilities to other companies in which an investment is held                                      4             –
                                    Deferred income                                                                               2,735          2,577
                                    Sundry other liabilities                                                                      2,489          2,224
                                    Other liabilities                                                                            6,414          5,856
                                       thereof non-current                                                                        1,986          1,932
                                       thereof current                                                                            4,428          3,924




                               [28] Related party relationships                                     cant influence over the financial and operating poli-
                                    In accordance with IAS 24 (Related Party Disclosures),          cies of the BMW Group. This also includes close
                                    related individuals or entities which have the ability          relatives and intermediaries. Significant influence
                                    to control the BMW Group or which are controlled                over the financial and operating policies of the Group
                                    by the BMW Group, must be disclosed unless such                 can arise when a party holds 20 % or more of the
                                    parties are not already included in the consolidated            shares of BMW AG or is a member of the Board of
                                    financial statements as consolidated companies.                 Management or Supervisory Board of BMW AG.
                                    Control is defined as ownership of more than one                     For the third quarter 2007, the disclosure re-
                                    half of the voting power of BMW AG or the power                 quirements contained in IAS 24 only affect the
                                    to direct, by statute or agreement, the financial and           BMW Group with regard to business relationships
                                    operating policies of the management of the Group.              with affiliated, non-consolidated entities, joint ven-
                                         In addition, the disclosure requirements of                tures, other equity investments as well as with mem-
                                    IAS 24 also cover transactions with associates and              bers of the Board of Management and Supervisory
                                    with parties which have the ability to exercise signifi-        Board of BMW AG.
                                                                                                                                   37




          The BMW Group’s relationships with affiliated,           Group and are made, without exception, on the basis
    non-consolidated entities are based on arm’s                   of arm’s length principles.
    length principles. Transactions with these related                  Susanne Klatten is a shareholder and member
    parties are small in scale and in the normal course            of the Supervisory Board of BMW AG, and also a
    of business.                                                   shareholder and Deputy Chairman of the Super-
          Transactions of BMW Group companies with                 visory Board of Altana AG, Bad Homburg v.d.H. which
    joint ventures and other equity investments – mainly           purchased vehicles from the BMW Group during
    BMW Brilliance Automotive Ltd., Shenyang (50 %)                the third quarter 2007. These sale contracts are
    and TRITEC Motors Ltda., Campo Largo (50 %) –                  not material for the BMW Group and are made,
    all arise in the normal course of business and are             without exception, on the basis of arm’s length prin-
    conducted on the basis of arm’s length principles.             ciples.
          Stefan Quandt is a shareholder and Deputy                     With the exception of these related party trans-
    Chairman of the Supervisory Board of BMW AG. He                actions, companies of the BMW Group did not enter
    is also sole shareholder and Chairman of the Super-            into any significant transactions with members of
    visory Board of DELTON AG, Bad Homburg v.d.H.,                 the Board of Management or Supervisory Board of
    which, via its subsidiaries, performed logistics services      BMW AG or with companies in whose representative
    for the BMW Group during the third quarter 2007.               bodies those persons are represented. The same
    In addition, companies of the DELTON Group pur-                applies to close members of the families of those
    chased vehicles from the BMW Group. These service              persons.
    and sale contracts are not material for the BMW


[29] Segment information                                                Segment information for the third quarter 2007
     The activities of the various segments are described          is as follows:
     in the Group financial statements of BMW AG at
     31 December 2006.

    Segment information
    by business segment                 Automobiles      Motorcycles   Financial Services      Reconciliations         Group
    in euro million                    2007    2006    2007     2006    2007       2006       2007       2006      2007     2006



    Revenues with third parties      10,331    8,805   259      277    3,141      2,429         47         46    13,778   11,557


    Inter-segment revenues            2,776    2,283      –       1      428        274     – 3,204   – 2,558         –        –


    Total revenues                   13,107   11,088   259      278    3,569     2,703      – 3,157 – 2,512      13,778   11,557


    Profit before financial result     788      631       7       7      176        186          2         58      973      882


    Result from
    equity accounted investments        –1        2       –        –        –          –          –         –       –1        2


    Other net financial result         – 83     – 22    –2       –3       15         –4      – 137      – 135     – 207    – 164


    Profit before tax                  704      611       5       4     191        182       – 135       – 77      765      720


    Return on sales              %      5.4      5.5    1.9      1.4      5.4        6.7          –         –       5.6      6.2
38




02
07
     BMW Group – an Overview
     Automobiles
                               Segment information for the first nine months of 2007 is as follows:
10   Motorcycles
12   Financial Services        Segment information
14   BMW Stock
                               by business segment                 Automobiles       Motorcycles    Financial Services      Reconciliations         Group
15   Financial Analysis
20   Interim Group Financial   in euro million                    2007    2006     2007     2006     2007       2006       2007       2006      2007     2006
     Statements
39   Financial Calendar

                               Revenues with third parties      30,439   27,894   1,017    1,000    8,810      7,334        146       140     40,412   36,368


                               Inter-segment revenues            8,343    7,368       5      10     1,291        976     – 9,639   – 8,354         –        –


                               Total revenues                   38,782   35,262   1,022   1,010    10,101     8,310 – 9,493 – 8,214           40,412   36,368


                               Profit before financial result    2,273    2,336    102       96       545        542        – 16        57     2,904    3,031


                               Result from
                               equity accounted investments         2       12        –        –         –          –          –         –         2      12


                               Other net financial result        – 161     – 29     –7       –7        18         –7        – 74      248      – 224     205


                               Profit before tax                 2,114    2,319     95       89      563        535        – 90       305      2,682    3,248


                               Return on sales              %      5.5      6.6     9.3      8.8       5.6        6.4          –         –       6.6      8.9
                                                                               39




Financial calendar
Annual Report 2007                            18 March 2008
Annual Accounts Press Conference              18 March 2008
Financial Analysts’ Meeting                   19 March 2008
Interim Report to 31 March 2008               29 April 2008
Annual General Meeting                        8 May 2008
Interim Report to 30 June 2008                5 August 2008
Interim Report to 30 September 2008           4 November 2008

Contacts
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           +49 89 382-2 41 18                             +49 89 382-2 53 87
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E-mail     presse@bmwgroup.com                E-mail      ir@bmwgroup.com

The BMW Group on the Internet
Further information about the BMW Group is available online at
www.bmwgroup.com.
Investor Relations information is available directly at www.bmwgroup.com/ir.
Information about the various BMW Group brands is available at www.bmw.com,
www.mini.com and www.rolls-roycemotorcars.com.
Q3




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Aktiengesellschaft
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Germany
Telephone +49 89 382-0

								
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